Theory of value (economics)

"Theory of value" is a generic term which encompasses all the theories within economics that attempt to explain the exchange value or price of goods and services. Key question in economic theory include why goods and services are priced as they are, how the value of goods and services comes about, and for normative value theories how to calculate the "correct" price of goods and services (if such a value exists). Theories of value fall into two main categories:

Intrinsic (objective) theories::"see main article: Intrinsic theory of value:Intrinsic theories, as the name implies, hold that the price of goods and services is not a function of subjective judgements. An example is the labor theory of value which says that prices in a market economy are a function of how much labor was put into the production of a product.

Subjective theories::"see main article: Subjective theory of value:Subjective theories hold that for an object to have economic value (a price), the object must be useful in satisfying human wants and it must be in limited supply. This is the foundation of the marginalist theory of value, of neoclassical economics. The marginal utility theory is not a normative theory of value, but simply an explanation of why things are priced as they are in a market economy.

See also

* Paradox of value
* Marginalism
* Cost-of-production theory of value
* Labor theory of value

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