Theory of value

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Theory of value is an area of study within economics concerned with what things are worth, and why they are worth what they are worth.

Theories of value include:

Adam Smith states there are two types of value, value in use, and value in exchange, and gives as an example,

Nothing is more useful than water: but it will purchase scarce any thing; scarce any thing can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it.[1]


  1. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Of the Origin and Use of Money, Book I, Chapter 4, Paragraph 13, First Edition 1776.