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March 27, 2023 

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FINANCIAL MARKET: A market that trades financial assets. Financial assets are the legal claims on the real assets in our economy and include such notable items as corporate stocks and bonds, government securities, and money. Without financial markets our economy would find it almost impossible to accumulate the funds needed for investment in big, expensive capital projects.

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VALUE:

The worth members of society place on a good, service, resource, commodity, or other asset, which is based on the direct or indirect satisfaction of wants and needs generated. In an economy that uses markets to exchange commodities, value is commonly indicated by price and measured by the economy's monetary unit.
The ultimate source of value is the amount of satisfaction generated from consumption. More satisfaction means more value. However, because value is based on satisfaction, it is highly subjective. What is valuable to one person might not be valuable to another.

To Each Their Own

The satisfaction generated by a particular commodity depends on the person being satisfied. As such, value also depends on the person doing the valuation. A particular good can generate a great deal of satisfaction, and hence be quite valuable, for one person, but not so for another.
  • Donna Newberry, for example, thoroughly enjoys the taste of horseradish sauce. She applies it to anything and everything--hot dogs, bologna sandwiches, ice cream, apple pie, breakfast cereal. It provides Donna with a great deal of satisfaction. As such, Donna places a high value on horseradish sauce.

  • Rhonda Newberry, Donna's twin sister, has a dramatically different opinion of horseradish sauce. She hates it. She hates it with a passion. Not only does Rhonda not apply horseradish sauce to any food product, she does not patronize a restaurant that serves it. Horseradish sauce provides Rhonda with no satisfaction. As such, she places a low value on horseradish sauce, as in zero.
If everyone derives the same satisfaction from the consumption of horseradish sauce as Donna Newberry, then the price is quite high. However, if the public subjectively values horseradish sauce like Rhonda Newberry, the price is very low.

Indirect Value

The value of consumer goods depends directly on the satisfaction generated. Donna is willing to a pay a premium price for horseradish sauce because she likes it, it satisfies her wants and needs.

In contrast, the value of productive resources (labor, capital, land, and entrepreneurship) is indirectly based on the value of the goods produced. A resource used to produce a good highly valued by society is also valuable.

Consider the situation facing two equally intelligent, equally talented, equally industries, college graduates.

  • Robert Fredrickson decides to pursue the study computer programming. Fredrick Robertson, his college classmate, chooses to study of classic English literature. The outcome seems obvious. The value of the labor resources of each graduate is ultimately based on the value of the goods each produces.

  • Robert Fredrickson takes a job with OmniComputer. The software he helped to develop, along with a hundred and forty-three other programmers, sells for $49.95 and is used by millions of computers. Based on software sales, OmniComputer places an annual value of $75,000 on Robert's productive resources.

  • Fredrick Robertson, in contrast, spends over a decade as a starving artist working on a science fiction trilogy. The trilogy sells over 100 million copies. Based on book sales, Fredrick's book publishing company places an annual value of $10 million on Fredrick's productive resources.
Fredrick receives more income each year because the good he produces with his labor resources (best selling science fiction trilogy) is more highly valued by the public than the good (moderately priced computer programs) Robert produces with his labor resources.

VALUE ADDED =>


Recommended Citation:

VALUE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2023. [Accessed: March 27, 2023].


Check Out These Related Terms...

     | satisfaction | consumer sovereignty | incentive | contributive standard |


Or For A Little Background...

     | second rule of subjectivity | opportunity cost | efficiency | scarce resources | unlimited wants and needs | wants | needs |


And For Further Study...

     | economics | scarcity | three questions of allocation | distribution standards | seven economic rules | political views | utility | diamond-water paradox | demand price | supply price | consumption | derived demand |


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