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--- lb:basic.economics [2026-04-29 06:24:06] – [Money] ninjasr
+++ lb:basic.economics [2026-04-29 06:57:16] (current) – [Value] ninjasr
@@ Line 65: / Line 65: @@
 </div>
 ===== Value =====
-What is ‘**value**’? Well ‘value’ is an abstract which roughly represents how useful/wanted a given thing is.\\
+<div passage>
-Gold is less useful than copper, but because gold is shiny it's desired more which means it's more ‘valuable’.
+What is ‘**<dfn>value</dfn>**’? Well ‘value’ is an abstract((:fn:>I'm using the term ‘abstract’ to refer to something that doesn't exist in the real world, but is purely ‘abstract’, meaning it exists purely conceptually or such.)) which roughly represents how useful/wanted a given thing is.
-Here it's necessary to point out something that is //very useful// to understanding things like pricing: **price** is //individually subjective// but //collectively objective//. But what does that mean?
+Gold is, in a practical sense, less useful than copper. But because gold is shinier and prettier than copper, it's desired by people more, which is what makes it more ‘valuable’.
+</div>
-Let's use an example. Let's say that I make two hotdogs. It cost me $0.50 to make each hotdog. Some guy comes along and he agrees to pay $1.50 for it. Then you come along and you pay me $2.00 for the hotdog.\\
+Here it's necessary to point out something that is //very useful// to understanding things like pricing: **price** is //subjective on an individual level//((:fn:>‘Individually subjective’.)) but //objective when taken collectively//.((:fn:>‘Collectively objective’.)) But what does that mean?
-Which of those prices represents the true value of the hotdog?\\
-The answer is that none of them do. This is because ‘value’ – and, by extension, the ‘price’ – is relative. All of them are a ‘correct’ representation of the value of the hotdog, just that what's ‘correct’ varies based on the surrounding context.
-The reason some guy paid $1.50 while you paid $2.00 is because those are the prices that we had agreed upon. He was willing to pay $1.50 for the hotdog and I agreed to sell it to him for that amount. Meanwhile you were willing to pay $2.00 for it, so I agreed to that too. If you had known the other guy had paid less, you'd probably want to pay that much too.\\
+<div passage>
-Basically every price of any good or service is individually negotiable like this. There //are// parts of this ‘equation’ that are //kinda, sorta, not really// set in stone – like me spending $0.50 to make each hotdog – but generally this applies.\\
+Let's use an example. Let's say that I make two hotdogs. It cost me $0.50 to make each hotdog. Some guy comes along and agrees to pay $1.50 for it. Then //you// come along and pay me $2.00 for the hotdog.
-Does this mean that all prices are nonsense and, in fact, nothing is worth anything? No, it doesn't. Prices may be //individually negotiable//, but if we factor in //everything else// the situation changes rapidly.\\
-So you aren't paying $2.00 because //every hotdog in existence is worth exactly $2.00// but because within your given context, that's how much the hotdog was worth //to you//.
-Basically, while the difference between what you and that guy paid might seem significant, if we consider the market as a whole...it might actually be completely normal. Let's say that the price of hotdogs within this market actually drift between $1.25-$5.00 and we can see that, actually, there's not that big of a difference at all. Now, if a hotdog were sold for less or more...**that** would be a significant difference.\\
+Which of those three prices represents the //true// value of the hotdog?
-I think it's generally here that we start talking about ‘**market conditions**’, which simply refers to the situation in a market: how the thing being sold relates to everything else being sold; what affects the demand of the thing being sold; what affects the production of the thing being sold and so on.
-While the price is individually negotiable...well, nowadays especially, the price tends to be ‘locked’. But it's still usually related to the rest of the market.
+The answer is that none of them do. This is because ‘value’ – and, by extension, the ‘price’ – is //relative//. All of them are a ‘correct’ representation of the value of the hotdog, just that what's ‘correct’ varies based on the surrounding context.
+</div>
-Why am I selling the hotdogs at that specific price? Well, because I'm probably looking at my competitors. Maybe I see that my competitor is selling hotdogs at a fixed price of $2.50. So I'm trying to undercut him by being more flexible with pricing on the one hand and for consistently selling at a lower price. My competitor may respond by lowering the prices himself.\\
+<div passage>
-This is **competition** and it can manifest in thousands of different ways, so I'll leave that for later.
+The reason //some guy// paid $1.50 while //you// paid $2.00 is because those are the prices that we had agreed upon. He was willing to pay $1.50 for the hotdog and I agreed to sell it to him for that amount. Meanwhile, you were willing to pay $2.00 for it, so I agreed to that too. If you had known the other guy had paid less, you'd probably want to pay that much too.
+Basically, every price of any good or service is individually negotiable like this.((:fn:>At least in theory.)) There //are// parts of this ‘equation’ that are //kinda, sorta, not really// set in stone – like me spending $0.50 to make each hotdog – but this generally applies.((:fn:>The reason being that the cost of the supplies used to produce the hotdog are also determined by negotiable prices. In practice though, these are usually treated as fixed costs.))
+Does this mean that all prices are actually nonsense and, in fact, nothing is worth anything? No, it doesn't. Prices may be //individually negotiable// (‘Individually subjective’), but if we factor in //everything else// the situation changes.
+</div>
+You aren't paying $2.00 because //every hotdog in existence is worth exactly $2.00// but because that's how much the hotdog was //worth to you at that moment in time//.
+<div passage>
+Now let's move on to the part that is ‘Collectively Objective’.
+It may seem like the difference between what you and that guy paid for the hotdog is quite significant...if we consider the hotdog market as a whole, that perspective may change.
+Let's say the price of hotdogs in this particular market drifts between $1.25-$5.00. Now we can see that, actually, there isn't that big of a difference between those prices at all. If a hotdog were sold for less or more than that, **that** would have been a significant difference.
+It's generally here that ‘<dfn>market conditions</dfn>’ start being brought up, which simply refers to what the given situation is in a particular market (or ‘the market’((:fn:>The terminology here is a little annoying, but ‘//a// market’ refers to a particular market (such as toys/transportation/agriculture) while ‘//the// market’ refers to all the markets collectively. Alternative terms include ‘the economy’. ‘//A// market’ is also sometimes replaced with ‘industry’, though the latter usually refers to the production side, while the ‘market’ refers to the consumer side.))((:fn:>I'll be honest that I don't think anyone specifically told me these definitions, but they make intuitive sense based on how I've observed them being used in practice.)) as a whole):
+  * How are the things being sold and how they relate to everything else in the market.
+  * What affects the demand of the things being sold. (Besides everything else.)
+  * What affects the production of the things being sold.
+And we could go on and on.
+</div>
+Nowadays, the price tends to be ‘locked’, meaning that customers usually don't directly negotiate the price of goods nowadays. But those prices are still affected by the overall conditions of the market.
+<div passage>
+So why am I selling the hotdogs at that specific price? Well, because I'm probably looking at my competitors.
+Maybe I see that my competitor is selling hotdogs at a fixed price of $2.50. So I'm trying to undercut him by being more flexible with pricing on the one hand and for consistently selling at a lower price. My competitor may choose to respond by lowering the prices himself.
+This is **competition** and it can manifest in thousands of different ways, so I'll leave that for later.
+</div>