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01 Value and Price

Introduction

In this section the most fundamental economic ideas are explained, namely the concept of value and the concept of price. The Contents of this section is outlined on the right and links are provided to the page on each sub-topic. If you read those pages the questions below should be answered for you.

Questions Answered

This section should answer questions like;

Why do we have boom and bust cycles?

Well actually they are not strictly cycles its just that we go crazy, get burned then forget we did then do it again usually on the pretext that its different this time or it could never happen again.

Because of Sentiment and_Exchange Value read all about it.

Why do we have liquidity problems?

Why does the west have Liquidity_Problems because all the moneys gone to China! See Non-Completion

How did the flash crash of 6th May 2010 happen?

See Price_Crashes and Price_Booms for the explaination and read about the event in the Financial Times Online in  That sinking feeling By Aline van Duyn, Michael Mackenzie and Jeremy Grant Published: 2nd June 2010. Oddly the proposed solution of a price "fuse" and the lack of an explanation of the events, suggests it has not been understood?

How come some of the richest people in the world live in the poorest countries?

Because for them labour is cheap and they can export. See Price_and_Place for a better explanation.

Why does China work for us and not China?

See Price_and_Place don't expect it will last. Despite our ambitions to empire, the Chinese are wiser than that.



(C)2010 Tom de Havas. The information under this section is my own work it may be reproduced without modification but must include this notice.

Contents

01 Value - It is very easy to confuse the concept of value with the concept of price. Value is not price. Imagine, if you will, a world without money and begin from there.

02 Exchange - When any bodies meet they can exchange things that they have for things that they value more, in other words they can move themselves into a more valuable circumstantial position through exchange.

03 Utility and Exchange Value - Not all value rests in the utility of a thing but also there is value in what it may be exchanged for, here or some place else now or in the future.

04 The Market - A look at markets without money and how money is born with the use of things that are of general value..

05 Money - How money facilitates trade chains which should form trade rings in the trade web of a healthy economy, plus a look at liquidity problems and Price.

06 Price with Time - How prices change over time and a look at real supply and demand and the effects of normal and reverse trading on price booms and crashes.

07 Price with Place - Local markets and the rise of merchants. Local markets and globalisation. A brief look at Global trade failure.

08 Price with Amount - The concept of the wholesaler.

09 Price with Form - The transformations of production and consumption, and the economic momentum that makes change in flows so difficult.

10 Value is not Price - A final reminder that value is not price.

By the end of this section you should have a sufficient understanding of the basics concepts of economics to move on and look at modern money.