How Do Economists Determine the Value of Resources?

Economists have a very hard job. They have to find a way to determine the best use of everything from apples to lakes. Almost all resources on earth are scarce. Land is an example of a scarce resource that almost every human being in a society has to pay for. Air is an example of a resource that currently has almost unlimited use.

Economists put human lives before all other concerns when they determine the value of a resource. They then try to come up with theories on how the resource will be used the best. Technology is probably the biggest factor in every economy since the beginning of time. Trains and trucks have made the transportation of goods much faster and more cost efficient. They have also created new expenses. They’ve created jobs for mechanics. Fossil fuels are now an extremely valuable resource. Land that contains oil is now more valuable than land that does not.

Most economists have to make considerations about the overall economy when they think about how goods are put to use. This is because the value of goods slide and change over time. Macroeconomics looks at how individuals and firms find use for their goods. They use a term known as utility. Utility is an interesting concept because it has no real intrinsic definition. There is no scientific way to understand how much a person is willing to pay for a piece of fruit. They may buy a bag of oranges for five dollars, but purchase a crate for only seven. Most economists need a broad understanding of calculus equations to get any work done. Supply and demand curves are very difficult to understand. Economists look at the costs associated with producing goods. Most firms will not produce a good unless they are able to do so at a profit.

Consumers also have to consider the costs associated with retail suppliers. Christian Broda of valuewalk.com is an economist from New York. He works at Duquesne Capital Management. He has suggested that conglomerates like Target and Walmart have been good for the economy. It may be because the intrinsic value of the resource is still maintained. Cotton t-shirts are still cotton t-shirts. It doesn’t matter who is selling them. Most large chains sell all of the major brands. Broda’s suggestion is one that most economists seem to agree with. It can be hard to gauge the exact value of different resources. It is easy to look at a rich person and consider them well off. Keeping prices as low as possible is good for both the rich and the poor. Relative wealth is meaningless if the value of wages and goods double at the same time. Resources are simply the most valuable when they are the most desired. The ultimate price of a good is what someone is truly willing to pay for it. Outside factors will always have an effect on what economists want to be an exact science.