Subjective Theory Of Value

AAA

DEFINITION of 'Subjective Theory Of Value'

The idea that an object's value is not inherent, and is instead worth more to different people based on how much they desire or need the object. The Subjective Theory of Value places value on how scarce and useful an item is rather than basing the value of the object on how many resources and man hours went into creating it.

This theory was developed in the late 19th century by economists and thinkers of the time, including Carl Menger and Eugen von Boehm-Bawerk.

INVESTOPEDIA EXPLAINS 'Subjective Theory Of Value'

For example, let's say you have one wool coat and the weather is extremely cold outside, you will want that coat to wear and keep you from freezing. In a case like this, the wool coat might be worth more to you than a diamond necklace. If on the other hand, the temperature is warm, you will not want to use the coat, so your desire for - and amount you value - the coat wanes. In effect, the value of the coat is based on your desire and need for it, thus it is the value you placed on it - not any inherent value of the coat.

RELATED TERMS
  1. Full Value

    The total worth of a financial instrument or organization. Full ...
  2. Perceived Value

    The worth that a product or service has in the mind of the consumer. ...
  3. Labor Theory Of Value

    An economic theory that stipulates that the value of a good or ...
  4. Cost Of Labor

    The sum of all wages paid to employees, as well as the cost of ...
  5. Labor Productivity

    A measurement of economic growth of a country. Labor productivity ...
  6. Cost Of Goods Sold - COGS

    The direct costs attributable to the production of the goods ...
Related Articles
  1. Cost-Push Inflation Versus Demand-Pull ...
    Entrepreneurship

    Cost-Push Inflation Versus Demand-Pull ...

  2. Measuring Company Efficiency
    Fundamental Analysis

    Measuring Company Efficiency

  3. Understanding Supply-Side Economics
    Economics

    Understanding Supply-Side Economics

  4. Do Cheap Imported Goods Cost Americans ...
    Economics

    Do Cheap Imported Goods Cost Americans ...

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center