Value and Price

In common language, value means usefulness of a commodity. When is said that law books have great value for an advocate, it is really meant its usefulness for the lawyer. This is called value-in-use.

In economics, value means value-in-exchange. Value in exchange means power of a commodity to purchase other goods.For example if one pen commands five pencils in the market, then value of one pen is equal to five pencils. Similarly if five pencils in the market, then value of one pen is equal to five pencils. Similarly if 1 kg of rice commands 2kgs of potato, then value in exchange of one kg. of rice in terms potato is 2kgs. of potato. Thus, value as used economics, is a comparison between any two commodities at a particular place and time.

Free goods like air, sunshine have great value in use but no value-in-exchange because they are plenty in supply. Only economic goods have value-in-exchange.