Value, in economics, means the power of a commodity to command other commodities in exchange. Value relates to the terms upon which one commodity exchanges for others. It must not be confused with price. A commodity’s price means its exchange power in terms of money (see Price ). Its value means its exchange power in terms of other commodities.
Value and utility.
In order to possess value, an article must have utility–that is, it must have the power to satisfy a want. For example, farm products always have value because everyone desires them. So farmers can usually find a market for their products. The desire for articles must be backed by purchasing power. No article will have any value if those who want it have no money or commodities to offer in exchange for it.
A thing may have great value and still be used in ways that harm humanity. For example, drugs and alcohol possess great utility. They are of benefit when used properly. But they become harmful when people misuse them or become addicted to them.
Value and scarcity.
In order to possess value, an article must be scarce. That is, it must be so limited in quantity that those who have it are able to get something else in exchange for it. Air, which has great utility, seldom has any value. There is so much of it that ordinarily everyone can have any quantity without having to pay anyone for it. But under certain conditions, air does have value. A good illustration is compressed air, which is bought and sold.
