Purchasing Power of Money | Money Printing doesn't make the Masses Richer

#economics #inflation #money

Price is the result of the subjective valuations of the exchangers. One good is being exchanged for another. The exchangers must have expected to profit from the exchange. If not, the exchange never would have been made. The goods are valued by the individuals according to the usefulness to them. A third party doesn’t designate what individuals are to value something. Price is a ratio of a good.

The subjective value must be measured by its marginal utility. If someone makes fishing poles, he can’t trade half of it for a piece of fish. The fishing pole would be useless, and the trade wouldn’t be made. He could give him two fish to complete the trade. However, the fishing pole maker only wants one fish and the other one will quickly spoil. Fish doesn’t make a good medium of exchange. They’ve encountered a barrier to indirect exchange.

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