Oscar Wilde described a cynic as ‘a man who knows the price of everything and the value of nothing’. For economists, the distinction between price and value is an important one. In common parlance, price and value are sometimes treated as being the same thing, which can cause confusion. For example, if you are out shopping with your friends, the question ‘what’s it worth?’ may produce an answer based on the selling price.
This is not an appropriate answer because different people value items differently, according to their own preferences. The ‘value’ to you of a chocolate bar is probably different to the value to your friends, so a single price cannot reflect the universal value of chocolate — and I am reliably informed that there are people who do not eat chocolate at all. Some people will want to buy at the going price because the price does indeed reflect its value to them. Some people will not buy it because the price exceeds their valuation and others would probably have been prepared to pay a higher price for it because they especially like chocolate.
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