Difference Between Value and Price

Value:

In Economics, the value of a product is taken in two senses. (i) Value-in-use. (ii) Value-in-exchange.

The utility of a product which one gets to satisfy a want is known as the value of a product in use. For example, you buy a jacket. When you use it you actually consume its utility. This is the value in use of the product.

The number of goods and services which one unit of a product can command in exchange for it is the value in exchange of a product. For example, a pen costs Rs. 20/while a pencil only Rs. 2/-. Therefore, a pen can be exchanged for ten pencils. Hence, the value (in exchange) of a pen is ten pencils. Generally, the term value is used in Economics as the value in exchange.

Price:

The value of a product measured in terms of money is called ” PRICE ” of the product. For example, if a pen can be exchanged for Rs.20/-, this will be the price of the pen.

A product will definitely have value / price if it has the following three characteristics.

i) Utility:

The product must have the power to satisfy a want as bread, clothes, pen, pencil etc, can satisfy human wants.

ii) Scarcity:

The supply of a product must be less than its aggregate demand. In other words, it must be purchased at a non-zero price, thus, free goods do not have value from the economic point of view.

iii) Transferability:

The product could be transferred from one place to another or it must at least be transferable through the transfer of ownership. For example, a piece of land can be transferred by the transfer of ownership.