Value is Subjective
This may seem like common sense, but I felt this was a good reminder, especially for me, to help with deciding if a purchase/trade is truly beneficial.
Money is a fascinating concept. It's something that we all use every day, yet it's something that we rarely think about. We take it for granted that money has value, but have you ever stopped to think about why that is?
The truth is that the value of money is entirely subjective. It's based on the collective agreement of society. We all agree that money has value, and so it does. But why do we agree that money has value? The answer is simple: because we believe that it does. We believe that money can be exchanged for goods and services, and so we assign it a value. However, this value is not fixed. It can change depending on a variety of factors.
For example, if there is a sudden increase in demand for a particular product or service, the price of that product or service will go up. This means that the value of money will decrease because you will need more of it to purchase the same product or service.
Similarly, if there is a sudden decrease in demand for a particular product or service, the price of that product or service will go down. This means that the value of money will increase because you will need less of it to purchase the same product or service.
This value can also change based on an individual’s own personal feelings. Subjective value refers to the idea that the value of a good or service depends on the individual's personal feelings and needs at that moment.
For example, let's say that you haven't eaten all day and you're really hungry. You walk into a convenience store and see a bag of chips that costs $5. To you, the bag of chips might be worth much more than $5 because you're so hungry and you need something to eat right away.
On the other hand, someone else who isn't hungry might not be willing to exchange $5 for a bag of chips because they don't need it right away.
Subjective value is important to understand because it helps explain why trade is beneficial. When two parties exchange goods or services, they both benefit because they are each able to obtain something that they value more than what they are giving up.
In the case of buying chips, you are giving up $5 in exchange for something that you value more than $5 at that moment (the chips). The store is giving up the chips in exchange for something that they value more than the chips (the $5). Trade allows each party to obtain something they value more than what they are giving up. This is why trade is important for economic growth and development.
The value of money is entirely subjective. It's based on our collective agreement as a society, and it can change depending on a variety of factors. Next time you're exchanging money to purchase something, remember that its value is entirely in our heads.
Is this trade beneficial to you? Is the item you are receiving worth more to you than the item you are exchanging it for?
Not sure if this will help anyone else, but I felt it was a good reminder to help me value my purchases and trades better and maybe help me save money.
