Value

Have you ever bought something and instantly regretted it? Trust me, we have all been there and you are not alone. Or on the other hand, maybe you bought something and liked it at first, but then, later on, regretted buying this item. We’ve all likely been there too! But why does this happen to us all the time? The answer is in something called value. Value is the amount an individual is willing to pay for an item or service. Value can vary from person to person or country to country. Value is almost always different for each individual. For example, someone who loves barbies and the color pink would likely pay a lot for a barbie in a pink dress. In contrast, someone who may not enjoy barbies and dislikes the color pink would probably not care to pay much or anything at all for the item. As a result, the barbie has a different value for each person. It is important to know that money has value, and each person makes their own decisions about where and when to spend their own money in order to maximize this value. 

When thinking about value, there are numerous different factors that are considered. The most obvious one is the quality of the product or service. For the most part, products that have a higher level of quality usually cost more money and therefore are more valuable. Another thing to consider when analyzing the value of something is the availability. For instance, if there is one last-second plane ticket available for a flight, it will be much more valuable than a plane ticket for an empty plane. The limited availability of a product can make it more valuable to certain consumers. In addition, one more factor that affects value is time. Although a slightly more complex factor, time directly affects the value of many things. The easiest example to imagine is a car. A brand new car loses much of its value the moment it is driven for the first time! This value often continues to diminish as the car gets older and new models come out as well. Even though those fancy cars look nice and luxurious, they can take a massive toll on your finances!

Moreover, when shopping for nearly anything, you must often compare value to save money and get the best deal possible. In order to further understand this concept, we can look at a more in-depth example. Consider customer A who is going shopping for groceries this weekend. He walks into Store #1 where they are selling 12 eggs for $12. Customer A divides the price of $12 by the number of eggs offered (12), to realize that Store 1 is charging 1$ per egg. This customer then goes to Store #2 and sees that they are selling 20 eggs for $16. Using the same method of calculation as before, the customer divides the price of $16 by the number of eggs offered (20), to calculate that the store is charging $0.80 per egg. By doing this, Customer A has now determined that by purchasing eggs from Store #2, they can maximize their value and save $0.20 per egg. This is a simple, yet efficient example of how value is utilized on an everyday basis. 

Every day, we inherently make choices on how, where, and when to purchase things. Whether it may be the new phone you want or the new pair of shoes, it is likely that by doing your research and due diligence beforehand, you can save money and improve the value of what you purchase. As smart financial decision-makers, we always want to get the most bang for our buck, and to truly do this you must understand the value of an item and how to get the most for what it is worth! Remember the many factors we talked about earlier and how they can affect the value of what you might purchase. So from now on, try your best to think long and hard before you buy something so you don’t regret it later on! See you next week!

----

https://kingdomecon.wordpress.com/2019/03/05/economics-is-all-about-this-concept-called-value-what-is-it-where-is-it/

https://pricing-news.com/the-price-quality-graph-and-the-fair-value-line-changing-minds/

*All rights of the content are reserved to the Wells Fargo Hands on Banking Curriculum*