As soon as we wish to know what to produce, there immediately arises the question: ‘How can people indicate what they want?’. A mere statement of want is meaningless, for, as we showed in Chapter 1, people always want something. A want is significant in economics only when a person is prepared to give up something in order to satisfy it. As the strength of the different wants varies, so will the amounts which people are willing to give up. In other words, different goods have a different value to them. Value is measured in terms of ‘opportunity cost’. For example, if Ms A is willing to work five hours for the money which will buy a hat, we say that the value of the hat to her is greater than the value of the five hours’ leisure forgone. Value therefore means the rate at which a particular good or service will exchange for other goods. It is important to note, however, that, while to have value a good must be capable of satisfying a want, a good which satisfies a want need not necessarily have value. For example, air satisfies a want; but, in normal circumstances, the supply is so great that nobody will give anything in exchange for it. Because it has no power to command other goods in exchange, it has, in economics, no value.
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