Concept of Value & Price
“Value” is an important term which is frequently used in Economics. But in economics it is not used in that sense as we use it in ordinary speech. For instance, when we say, education has a great value, fresh air is always valuable, and it indicates value in use (i.e. utility). But in economics the term “value” is used in the sense of value-in-exchange. Therefore it can be defined as under.
Value of a commodity refers to the goods that can be obtained in exchange for it.
Value of commodity means the commodities or services that we can get in return for it.
It is a purchasing power of a commodity in terms of other commodities and services.
Therefore, three qualifications are essential for a good (commodity) before it can have value.
It muse possesses utility
It must be scarce and
It must be transferable and marketable.
In Pre historic times, people did not know money and they had a barter system in which goods are exchanged with goods. Therefore, in those days value and price were used synonymously. But now days, goods are exchanged for money. The price of commodity today means its money – Value.