VALUE Vs PRICE
There are four major attributes of a commodity i.e., an item or service produced for, and sold on the market has four major attributes. They are: • a value • a use‐value (or utility) • an exchange value • a price (it could be an actual selling price or an imputed ideal price)
In simple words, value refers to the importance of a thing or utility of a commodity. But in economics the term “value” has a quite different meaning. According to the famous economist, Adam Smith, the word “Value” can be used in two meanings: i. Value in Use and ii. Value in Exchange. 1) Value in use: Value in use is also called Utility or a want satisfying power of a commodity. For example, water satisfies our thirst. The quality of water is the value‐in‐use of water. Since water is not scarce, it is free good, hence not studied in economics. 2) Value in Exchange: Value in Exchange means purchasing power of goods. It is the power of a good to secure other goods in exchange. It is the value of a commodity in exchange of the other commodity. For example, if 3 kgs. of wheat can be obtained in exchange of 1 kg. of rice, the exchange value of 1 kg of rice is equal to 3 kgs. of wheat or the value of 3 kgs. of wheat is equal to 1 kg. of rice. OBSERVATION: In economics, the term “value” is used for the value of exchange. It is the amount of goods and services that can be secured in exchange for a particular commodity. In the words of Prof. Tausslg. “The value of a commodity means in Economics, its power of securing other commodities in exchange. In the words of Anatol Murad, “The value of a goods is its purchasing power.” The number of units of something obtained in return for 1 unit of a commodity can be the value of that commodity. If 2 kgs. of potatoes can be obtained in return for 1 kg. of wheat, the value of 1 kg. of wheat will be equal to 2 kgs. of potatoes. ...
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