Value
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VALUE DEWETT 40/41
VALUE - MEANING • In Economics, we do not use the word VALUE, in the same sense as we use in ordinary speech. • We often say education has great value or fresh air is very valuable. Here the term ‘value’ refers to usefulness. This is value – in-use for which economists use the term ‘utility’ • Economists use the term ‘value’ in the sense of ‘valuein-exchange’. We cannot exchange fresh air for anything, so its value is Zero in Economics-even though it is very valuable. A pencil, on the other hand is valuable because it can be exchanged for paper or ink. • The value of a commodity, thus, means the commodities or services that we can get in return for it. Or it is its purchasing power in terms of other
Attributes of value • In order to have value in market, a commodity must not be free good, for no body will give any exchange for free good. The following 3 qualities are essential for a good before it can have value- all qualities required together. it must have utility It must be scarce
Utility/scarcity/ marketability or transferability • All the above qualities should be possessed simultaneously
• Nobody will be prepared to give anything in exchange for a commodity which is not scarce or which does not possess any utility or which is not transferable. • For eg, air possess utility but it is not scarce. • Rotten eggs may be scarce, since they possess no utility they have no value in Economics. • A book has utility, it is scarce and transferable. It has, therefore Value in
PRICE • VALUE is not same thing as PRICE. • When VALUE is expressed in terms of MONEY, it is called PRICE.
VALUE IS RELATIVE • Since value in Economics means value in exchange, it must be relative and cannot be absolute. • For eg, value of Pen is great , gives an idea of utility only. In economic sense, we must relate to something
Value- equates between two items
• Eg, • One pen = 5 doz pencils. • If pen increases its value, it will buy more pencils than before which means pencils have gone down in values. • If pencils becomes more valuable, less than 5 doz will be needed to buy a pen. • Thus one thing goes up, other things come down in value ie both sides of the equation cannot rise together. Hence there cannot be a general increase or fall in values. • We can say there can be a general increase
VALUE - MEANING • In Economics, we do not use the word VALUE, in the same sense as we use in ordinary speech. • We often say education has great value or fresh air is very valuable. Here the term ‘value’ refers to usefulness. This is value – in-use for which economists use the term ‘utility’ • Economists use the term ‘value’ in the sense of ‘valuein-exchange’. We cannot exchange fresh air for anything, so its value is Zero in Economics-even though it is very valuable. A pencil, on the other hand is valuable because it can be exchanged for paper or ink. • The value of a commodity, thus, means the commodities or services that we can get in return for it. Or it is its purchasing power in terms of other
Attributes of value • In order to have value in market, a commodity must not be free good, for no body will give any exchange for free good. The following 3 qualities are essential for a good before it can have value- all qualities required together. it must have utility It must be scarce
Utility/scarcity/ marketability or transferability • All the above qualities should be possessed simultaneously
• Nobody will be prepared to give anything in exchange for a commodity which is not scarce or which does not possess any utility or which is not transferable. • For eg, air possess utility but it is not scarce. • Rotten eggs may be scarce, since they possess no utility they have no value in Economics. • A book has utility, it is scarce and transferable. It has, therefore Value in
PRICE • VALUE is not same thing as PRICE. • When VALUE is expressed in terms of MONEY, it is called PRICE.
VALUE IS RELATIVE • Since value in Economics means value in exchange, it must be relative and cannot be absolute. • For eg, value of Pen is great , gives an idea of utility only. In economic sense, we must relate to something
Value- equates between two items
• Eg, • One pen = 5 doz pencils. • If pen increases its value, it will buy more pencils than before which means pencils have gone down in values. • If pencils becomes more valuable, less than 5 doz will be needed to buy a pen. • Thus one thing goes up, other things come down in value ie both sides of the equation cannot rise together. Hence there cannot be a general increase or fall in values. • We can say there can be a general increase
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