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) VALUE 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. f 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. If a commodity does not have any power to secure other commodities in exchange, it has no value. Prof. Belly is right to observe that a commodity does not have any value by itself. Its value is represented only through some other commodity.
Attributes of Value To a layman, value may have the same meaning as utility but in economics the two are quite different. In economics, a commodity has a value when the following attributes are found in it: 1) Utility: A commodity has value only when it has a utility or power to satisfy our wants. If a commodity has no utility, no other commodity or service will be secured in exchange for it. 2) Scarcity: A commodity has a value only when it has an attribute of scarcity along with utility (i. e. , scarce besides being useful).
A commodity is scarce when its demand exceeds its supply. Air, water, sunlight do have their utility, but these are not scarce. Their supply exceeds their demand. Therefore, the do not have any value. 3) Transferability: A commodity has a value only when by transferring it, some other commodity can be secured in exchange. Transferability refers to changing the ownership of a commodity, or securing another commodity in exchange for it. Thus, by virtue of transferability, the good which was once yours may now be owned by another man.
Thus, for a good to have value, besides possessing utility, it should also be scarce and transferable. Unless all these three attributes are present in a good, it cannot have value. For example, air has utility but since it is not scarce or transferable, it has no value. Since rotten eggs are scarce and transferable but posses no utility, they also don’t have value. A car, since it possesses utility and is scarce as well as transferable, has value. PRICE In the modern age, we do not secure goods in exchange for other goods. We do n