Have you ever over what guided by the manufacturers of the goods by setting them certain price?It is clear that they take into account the cost of production of its competitors, but then the competitors have something to navigate.We can say that their pricing policy depends on the reaction of consumers.Well, that depends on the decision of the buyer?
labor theory of value
first who tried to explain what determines the value of certain goods, was none other than Adam Smith.He said he was not silver and gold were initially acquired all the riches of the world, but only to work.With this it is very difficult not to agree.Labor theory of value has been further developed in the writings of V.Petti, Ricardo and, of course, Karl Marx.
These economists believed that the cost of any product created for the market exchange depends on the labor input required for its manufacture.This is what determined exchange proportions.At the same time the work itself may be different.It does not require qualification and, on the contrary, needed.As for the latter requires prior training, certain skills and knowledge, then it is valued slightly higher.This means that one hour of labor specialist can be equated to a few hours a simple laborer.Thus, the labor theory of value suggests that the price of commodities ultimately determined by the socially necessary (average) time-consuming.Is this an exhaustive explanation?It turns out that there is no!
theory of marginal utility
Imagine that you spent some time in the desert, and your life depends on a few sips of life-giving water.At the same time you have with a million dollars in cash.For this price met trader offers to buy him a jug of clean cold water.Would you agree to make such an exchange?The answer is obvious.Unearned theory of value, the founders of which were O. Böhm-Bawerk, and Wieser F. Menger says that the value of goods and services is not determined by the cost of labor and the economic psychology of the consumer, the buyer of useful things.If you think about it, this statement contains some truth.Indeed, the benefit of a specific person estimates, depending on their life circumstances.Moreover, the subjective value of the same product as its acquisition decreases.For example, in the heat we will gladly buy themselves ice cream, eating it, we might want to buy a second and even third.But the fourth, fifth and sixth will not have to have such a value as the first.Labor theory of value such behavior can not be explained, and utility theory to cope with it easily.
theory of demand and supply (neoclassical school)
representatives of this school, whose founder was an outstanding economist Alfred Marshall, saw the value of one-sidedness of the previous explanations and decided to join the two previously described approach.In their theory of the cost of goods clearly seen a departure from trying to find a single source of product prices.From the viewpoint of A. Marshall, the debate about what the cost is adjusted - or utility costs - equivalent to argue about exactly how the blade (upper or lower), scissors cut paper.Neoclassical believe that the value of commodities is determined by the relationship of buyer and seller.Therefore, they have in the first place are the factors of supply and demand.In other words, the magnitude of the value depends on the ratio of expenditure manufacturer (sellers) and income consumer (buyer).This ratio is equal, and each side estimates this value in its own way, taking into account the maximum possible concessions to each other.
