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