The term 'value' refers to the exchange qualities of a good.
According to Marshall, 'the term value, is relative and expresses the relation
between two things at a particular place and time'.
Value is of two kinds (1) value-in-use and (2) value-in-
exchange. Although air, rain and sunshine have value-in-use, they do not have
value-in-exchange. In economics, we are interested only in those goods which
have value-in-exchange. For a good to have value- in-exchange, it must possess
utility, it must be scarce in relation to demand and it must be possible for us
to exchange it. In other words, all economic goods have value-in-exchange.
Value is generally measured in money and it is a relative
term. The value of a thing changes according to time and situation. For
example, ice has more value in summer than in winter.
When value is expressed in money, it is called price. Generally, economists make no distinction between value and price. All prices are related to one another. They form the price system. The prices most familiar to us are the prices we pay for goods sold in market, that is, retail prices. Many payments like rent, wages and interest are also prices which we pay respectively to land, labour and capital. Price system plays a very important role in a capitalistic economy. Buyers express their desire for goods only through prices. Every price we pay for a good is a vote in favour of it. It is the price system that regulates the economic activity of a society.