SOME ECONOMIC AND COST CONCEPTS.
2.1. Concepts of value and utility.
Value is a measure of the worth that a person ascribes to a good or a service.
Thus, the value of an object is inherent not in the object but in the regard that a person has for it.
Utility is a measure of the power of a good or a service to satisfy human wants.
Thus, the utility of an object, like its value,inheres not in the object itself but in the regard that a person has for it.
The evaluation of the utility of various items is not ordinarily constant but may be expected to change with time. The possibility for exchange exists when each of two persons possesses utilities desired by the other.
If the supernatural is excluded from consideration, all that has utility is physically manifested.Utilities must be created by changing the physical environment. The purpose of most engineering effort is to determine how physical factors may be altered to create the most utility for the least cost in terms of the utilities that must be given up.
2.2. Consumer and producer goods.
Two classes of goods are recognized by economists: consumer goods and producer goods.
Consumer goods are the goodsand services that directly satisfy human wants. Producer goods are the goods and services that satisfy human wants indirectly as part of the production or construction process.
Once the kind and amount of consumer goods to be produced has been determined, the determination of the kinds and amounts of producer goods and facilities needed to produce them may be approached objectively. The extentto chich producer utility may be considered by logical processes is limited only by factual knowledge and the ability to reason.
2.2.1. Utility of consumer goods.
People will consider two kinds of utility. The utility a person ascribes to goods and services that are consumed directly is in large measure a result of subjective, nonlogical mental processes. The determination of the kinds andamounts of consumer goods needed at any one time may depend upon the most subjective of human considerations Once human are assured of physical existence, they reach out for satisfactions related to being a person rather than merely to being a physical organism.
2.2.2. Utility of producer goods.
The second kind of utility that an object or service may have for a person is a means to an end, andit is usually considered objectively. The kind and amount of producer service, the amount and kind of labor, and the numer of various types of machines are determinable within rather narrow limits.
2.3 Economic aspects of exchange.
Economy of exchange occurs when utilities are exchanged by two or more people.
2.3.1. Mutual benefit in exchange.
Exchanges are made when they are thought toresult in mutual benefit. This is possible because the objects of exchange are not valued equally by the parties to the exchange, and they develop in different economic environments. Economy of exchange is also possible because consumer utilities are evaluated by the consumer almost entirely, by subjective considerations.
The difference between the utility that a specific good or service has for thebuyer and the utility it has for the seller represents the profit or net benefit that is available for division between buyer and seller. This difference may be called the range of mutual benefit in exchange.
The factors that may determine a price are infinite in variety. A person seeking to sell may be expected to make two evaluations: the minimum amount he will accept and the maximum amount aprospective buyer can be induced to pay by persuasion.
2.3.2. Persuasion in exchange.
The pertinent fact is that a proposition which was at first undesirable now has become desirable as a result of a change in the customer, not in the proposition. Persuasion as it applies to the sale of goods is of economic importance to industry.
Whatever the approach, factual or emotional, persuasion...