Value is defined in the oxford dictionary as something that is held dear, important, something of worth or of usefulness. Value can be relative and in monetary terms it can be compared in terms of the price of something. Economic value is just but one of the many possible forms in which we can define and give the measure of value. There are may be other types of value but economic value are very useful when economic choices are to be made.
People measure economic value based on the priorities and preferences or opportunity costs. Economists therefore believe that individual people are the best in determining what they need. In this vein therefore, we can say that economic value is based on choices and their priorities. These vary normally and are expressed through regular and constant transactions they keep making. Value therefore can be based on what someone shall be willing to fore go in order to get what they desire. In most cases and in the modern economic times, value is measured by the price that is attached on the item.
Concept of Value
There are two dominant theories of value namely the subjective and intrinsic concept. The subjective theory supposes that value is based on the needs and wants of the society. This concept states that to poses value, an object must be useful and should satisfy the needs of an individual. While the intrinsic concept holds that there is an objectively correct value of an object irrespective of people’s judgments, according to The Concept of Intrinsic Value by Moore G .E. This holds that value of an object is contained in the item itself because of the cost and process of producing it as its measure. With regard to the two theories, values of an item should be intrinsic other than subjective because much as one assumes satisfaction from an object, but if it is not genuine then the desired worth or importance can be found .
The most important and valuable things in the world are many. However there are basic or essential things (primary things) and others are secondary. But with changing times and development, the measure of the importance and value of the things can only be but relative. Some of these things are;
Shelter and Clothing. It is practically impossible to survive without any shelter. Shelter helps to protect us from the sun, rain, wind, cold, heat and sand storms. Whereas clothing is equally important and valuable to humans because it covers the body. Clothing also helps human appear beautiful and attractive, it is for protection, clothes help in identification, it is for work related purposes and for special occasions “whyguides.com”
Food and Water. Food and water keep a person alive. Basically one cannot survive without eating and drinking.
Health and Sanitation. These are very important for the human to stay healthy.
In terms of economics, the most important thing is money. Money is one item that can enable one to get land, capital and do entrepreneurship in business. According to Freakeconomics by Levitt, D, Steven & Dubner J Stephen the needs in life are only possible with money. However, knowledge is also important because without it, money cannot be use to any ones satisfaction.
Other important things include education, happiness and pleasure, wisdom and knowledge, love, family, etc.
With regard to marginal utility and value of goods and services, we shall do well to first understand the terms.
Total utility is defined as total satisfaction derived from consuming a given commodity whereas marginal utility is the additional satisfaction derived from consuming an extra unit of a commodity. Marginal utility assumes that a consumer aims at maximization of utility, there is a fixed level of income, the prices of commodities are fixed, there is perfect knowledge about the market, the tastes and preferences do not change and the units of the commodity on the market is homogeneous. Fundamentals of A ‘level Economics, by Kakungulu Moses
Heilbroner, Robert in The Worldly Philosophers on marginal utility shows that the higher the marginal utility, the higher the price of the commodity, the lower the quantity of the commodity shall be demanded and the lower the marginal utility, the lower the price and the higher the quantity demanded. With regard to water-diamond paradox, we see that because of scarcity of diamond, it has a high marginal utility and so it commands a high price and on the other hand, water exists in abundance and so it has a low marginal utility and low price as compared to diamond.
Meanwhile in Naked Economics by Wheelan, Steven it is argued that marginal utility should affect the value of goods and services is justified. However, marginal utility itself has limitations for it is not applicable to situations where commodity prices are to keep on changing due to conditions like inflation. Marginal utility also assumes that units of commodity consumed are homogeneous which is not practical, and it cannot apply to commodities like money whose marginal utility increases as more and more of the money is consumed.
We can thus conclude that marginal utility may affect the value of goods and services but because of some limitations, it cannot always do for all goods and services since they are homogeneous across the market.