Effectiveness
As previously stated economics is largely concerned with efficiency, however the ability of a good or service to satisfy a want directly impacts efficiency. While a good or service may be able to be produced very cheaply if it doesn’t satisfy a want it is ultimately a waste of resources (inefficient). Therefore economics must be understood in terms of both effectiveness and efficiency.
Value
You have heard it said that “One man’s trash is another man’s treasure.” This saying emphasises the fact that different people can value the same thing very differently. A good that satisfies a want can be seen as valuable.
Capitalism recognises that self-interested individuals value things differently. To achieve a coordinated outcome between individuals capitalism uses markets to allocate resources efficiently and effectively. This is achieved through the use of prices and competition.
My next post will discuss the link between individual value and prices. It will also discuss how prices and competition are used to produce an efficient outcome in markets.
But this I call to mind and therefore have hope: 