Investopedia

Continue to Site »

Labor Theory Of Value

Filed Under » , , , ,
Dictionary Says

Definition of 'Labor Theory Of Value '

An economic theory that stipulates that the value of a good or service is dependent upon the labor used in its production. The theory was first proposed by Adam Smith (1723-1790), the founder of modern economics, and was an important concept in the philosophical ideals of Karl Marx. The labor theory of value suggests that goods which take the same amount of time to produce should cost the same.
Investopedia Says

Investopedia explains 'Labor Theory Of Value '

Opponents of the labor theory of value purport that it is not labor that determines the price of a good or service; rather, it is simply a function of supply and demand for a given good or service that determines its price. According to the theory, if the cost of purchasing something is greater than the amount that the purchaser values the time it would take to produce the good, then he will make it himself rather than buy it.

Articles Of Interest

  1.

    What Are Economies Of Scale?

    Is bigger always better? Read up on the important and often misunderstood concept of economies of scale.

  2. The Economics Of Labor Mobility

    Loosening labor restrictions has both good and bad effects for a country and its workers.

  3. Predict Inflation With The Producer Price Index

    Find out how the PPI can be used to gauge the overall health of the economy.

  4. Leading Economic Indicators Predict Market Trends

    Leading indicators help investors to predict and react to where the market is headed.

  5. 5 ETFs Flaws You Shouldn't Overlook

    Despite their popularity, exchange traded funds have some drawbacks that investors should know about.

  6. Great Company Or Growing Industry?

    Look at the big picture when choosing a company - what you see may really be a stage in its industry's growth.

  7. Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!

  8. Liquidity Vs. Solvency

    Learn about the differences between these two words and how each one is used in the stock market.

  9. Prisoner's Dilemma

    Learn more about this classic game theory scenario.

  10. Is Growth Always A Good Thing?

    Getting big quickly looks good, but companies can get into trouble when they do it too fast. Find out how to spot this trouble.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.

  2. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  3. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  4. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  5. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  6. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.
Trading Center