Monetary Value: Definition & Examples

Monetary Value: Definition & Examples
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  • 0:05 Monetary Value Defined
  • 1:00 Determining Value
  • 1:45 Importance
  • 2:55 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
Monetary value is a concept that helps makes our modern economic system possible. In this lesson, you'll learn about monetary value, its related concepts, and its importance.

Monetary Value Defined

Monetary value is value in currency that a person, business, or the market places on a resource, product, or service. In fact, most goods and services in our modern economy are priced based on monetary value. Let's look at some examples of resources, goods, and services priced by monetary value:

  • Commodities, such as precious metals, agricultural products, oil, gas, and other natural resources
  • Tangible property, which is really any physical man-made thing, such as a computer, pencil, and art
  • Intangible property, such as patents, literary rights, and publishing rights
  • Land
  • Certain legal property rights, such as gas, mineral, oil, timber, and water rights
  • Services
  • Labor, such as wages and salary
  • And businesses

In fact, almost everything related to our modern economy and market has a monetary value.

Determining Value

If we assume a perfectly competitive market and no government intervention on price, then we can say that the monetary price of a resource, good, or service is determined by the market according to the law of supply and demand. The law of supply and demand is a pretty simple concept. All things being equal, if demand for something is high but the supply of it is low, then the price will be high. However, if the demand is low and the supply is high, the price will generally be low. The price will reach equilibrium, or stabilize when supply equals demand, which can be depicted graphically as follows:

You can also view fair market price as the price at which a willing buyer will pay for a product and a willing seller will sell it.

Importance

A modern economy cannot function without being able to apply a monetary value to goods and services. Let's look at why it's important.

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