IGNOU MNRE 16 2018 - Discuss the concept of economic values. How economic values are estima

Question

Discuss the concept of economic values. How economic values are estimated?

16 Feb 2018

Answer :

Word Count : 831

Economic value is the maximum amount a consumer is willing to pay for an item in a free market economy or the amount of time an individual will sacrifice waiting to obtain a government-rationed good in a socialist economy. In contrast, market value represents the minimum amount a consumer will pay. Economic value thus often exceeds market value.

The economic value of a good or service is determined by preferences of a given population and the tradeoffs its members make given their resources. Economic value is also directly correlated to the value that any given market places on an item.

Economic Value of Consumer Goods

Economic value is not a static figure; it changes when the price or quality of similar items changes. For example, if the price of milk increases, people may buy less milk and less cereal. This might lead manufacturers and retailers to lower the cost of cereal to entice consumers to buy more. How people choose to spend their income and their time, therefore, determines a good or service's economic value.

Economic Value in Marketing

Companies use the economic value to the customer (EVC) to set prices

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