Market Values (Prices) in a Developed Market
We have seen that the term "value" is used in two related but conceptually distinct senses, which we have termed objective value and subjective value (pp. 2.4:17-8). Praxeology is primarily concerned with subjective values and with the patterns that arise as human beings pursue such values. "Value" is also often used in a third sense, referring to the market price of a good. Such money value, as has been shown, derives from the subjective value scales of market participants. Unlike objective and subjective values, which are ordinal rankings, money value is represented by a cardinal quantity—by a certain number of money units per unit of the good. Money value is also known as "market value," "monetary value," or (especially in the case of durable goods) "capital value." We have already found that a good's money value is determined by supply and demand, which are in turn determined by the value scales of buyers and sellers. In a well-developed economy where goods are produced for exchange using money, what are the specific factors that determine how these goods are valued by buyers and sellers? In this subsection, we analyze in further detail the determinants of the money values of consumer goods and factors of production. Our analysis presumes that producers and consumers can foresee the consequences of their decisions, since the effects of risk and uncertainty will be addressed later. Because consumer goods are the ultimate goal of production, let us begin by analyzing their money value.