Archive

Tag: value

An economic value is the worth of a good or service as determined by the market. The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods which can be exchanged. From this analysis came the concepts value in use and value in exchange. Wealth maximization predicts that a person will choose to obtain the good or service in the place where it is cheapest, where the amount given up is the least. Value is linked to price through the mechanism of exchange. When an economist observes an exchange, two important value functions are revealed: those of the buyer and seller. Just as the buyer reveals what he is willing to pay for a certain amount of a good, so too does the seller reveal what it costs him to give up the good. Additional information about value is obtained by the rate at which transactions occur, telling observers the…