AUSTRIAN ECONOMICS ADDICT

VALUE IS SUBJECTIVE

This article titled, Masters’ Ticket Prices Drop In Wake Of Tiger”s Absence, by Dan Wetzel, at yahoo.com, shows that value is not objective it is subjective. Value exists in the mind of each individual, it does not exist in an object. I could produce the best mouse trap ever invented for a price of x, but if no one is willing to pay x,  it has no value to anyone other than me. If you offered a sports fan  free tickets to either Saturdays third round at the Masters, or Saturdays Final Four games, he would make the decision based on which event he valued more, not on the monetary value of the tickets.

SUPPLY AND DEMAND

What does the drop in the price of the tickets mean? It doesn’t mean that people don’t value the Masters tournament, it just means that some people value it less when Tiger is not playing. After a bad back forced Tiger to withdraw from a tournament a month ago, demand for Masters tickets started to slow as people began to speculate that he wouldn’t play in this years Masters. Demand really dropped off when he officially withdrew from the Masters. This drop in demand revealed itself as the price for tickets began falling. The law of supply and demand is always in play, and in this case it says; if demand is low and the supply is fixed, the price will fall, and conversely if demand is high and the supply is fixed, the price will rise.

CONSUMER SETS WAGES

When you hear people say “they wouldn’t pay a particular athlete a particular amount of  money”, or “this athlete isn’t worth that much”, they obviously don’t understand subjective value, or supply and demand. The reason Tiger gets paid more than any golfer is because the value he creates is in high demand. There is a high number of people who value what he produces. Put simply, when there is a fixed supply of Tiger Woods, and a high demand for him, his price rises. If there weren’t enough consumers to voluntarily pay for the value they subjectively think Tiger produces for them, he wouldn’t get paid these “outrageous” sums of money. The consumer ultimately sets all prices in the process of production, and this includes the wages or salaries of all workers. So if you think certain professions don’t get payed enough, blame the greedy consumer, and if you think other professions get paid too much, blame the generous consumer.

Related Article – In a previous post, Ticket Scalping; The True Free Market In Action, we talked about voluntary exchanges from the stand point that each person involved in the exchange values what they receive more than what they give up, or no exchange would take place. Value is increased in voluntary exchanges.

Related Article – Spontaneous Order = Free Market Economy, by austrianaddict.com.

Related Article – Spontaneous Order Utilizes More Knowledge Than Central Planning Could Ever Hope To Utilize, by austrianaddict.com.

Related Article – Spontaneous Order More Complex Than Top Down Planning, by austrianaddict.com.

Related Article – Spontaneous Order Demonstrated By Traffic With No Signals, by austrianaddict.com.

This entry was posted on April 7, 2014 at 4:17 pm and is filed under Econ. 101. You can subscribe via RSS 2.0 feed to this post's comments.

Tags: Generous Consumer, Greedy Consumer, Masters Ticket Prices, Spontaneous Order, Subjective Value, Supply and demand, Ticket Scalping, Tiger Woods Withdraws Masters, Voluntary Exchange