The Subjective Dance of Value: How Price Emerges from Needs and Wants

   Value is subjective and price is determined by the actions of buyers and sellers. The premise of exchange is that both parties believe that what they get is more valuable than what they pay. Unless it is a forced transaction, no one is willing to exchange. Buying a piece of bread for 10 yuan does not mean that the value of a piece of bread is equal to the value of 10 yuan, but it is precisely the inequality that makes exchange possible.
   If I think the value of the bread is higher than 10 yuan, I will exchange it for someone else’s piece of bread. Similarly, the owner of the bakery believes that 10 yuan is worth more than a piece of bread, so he is willing to exchange it with me. In this exchange, both parties believe they are getting something more valuable.
   Why do the two parties have different value judgments for the same piece of bread and the same 10 yuan? Because value is subjective and everyone’s judgment is different, it is because of this that transactions are possible.
   The bakery owner thinks that selling a piece of bread for 10 yuan will make him suffer a loss, so he will price it at 12 yuan. But after the price was 12 yuan, I stopped buying it because I felt it was not cost-effective to spend 12 yuan on a piece of bread. In this way, the transaction cannot be carried out. Therefore, the price is the result of bargaining between buyers and sellers in the market until both parties are satisfied. The so-called mutual satisfaction means that both parties believe that what they get is more valuable than what they pay.
   Everyone has needs, which requires exchange, and complete self-sufficiency is impossible.
   The baker meets my needs, and I meet the baker’s need to make money. This is called mutually beneficial cooperation. This is true of everything in the world that involves human action.
   I spend money to see a doctor because I think the elimination of pain is more valuable than the money spent. If I didn’t think so, I would not spend the money and would rather endure the pain. If I think this hospital is expensive, I will find a cheaper hospital, provided that the streets are full of hospitals. Why can’t the streets be filled with hospitals? Aren’t the streets full of restaurants, eateries, and snack bars? I spend money to take classes at a tutoring institution. If there are tutoring institutions all over the street, I will have more choices and it will be easier to find a cost-effective tutoring class. When I look for a job, I will comprehensively weigh the nature of the job, environment, salary, benefits, etc., and then decide where to work and what kind of work, as long as the pros outweigh the cons and the gains outweigh the losses. Others are willing to give me a job based on profit calculations, thinking that the value I might create is higher than the cost of hiring me.
   Where there is demand in this world, there is supply. The reason for the existence of industrial and commercial enterprises, shops, vendors, etc. is to meet people’s various needs, and they also make profits while meeting people’s needs. It is impossible for the streets to be filled with hospitals. In that case, hospitals cannot make more money. It is impossible not to find a restaurant on the street and let people starve to death. Before people starved to death, the profit-seeking businessmen arrived long ago. Supply and demand are always changing, but will eventually reach a state of dynamic equilibrium. The prices of various goods and services are not fixed, but generally tend to be at a reasonable level. A profiteering industry cannot exist for a long time. Everyone wants to make money, and you cannot make money alone. When everyone flocks to this industry, supply will increase, but demand will remain unchanged, and prices will inevitably fall.
   This is true of everything in the world, and I mean everything, as long as it has to do with people.

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