Water is crucial to our survival and has many uses, and yet is very cheap. On the other hand, Diamonds are very expensive. facebook is free, a certain car may be cheap, whereas Bugatti and Bentley are among the most expensive cars in the world.
On the first look it seems like what has high “use value”, has low “exchange value” (price consumers pay for it) and what has high “exchange value”, has low “use value”. But there is more to that.
Some say this paradox is explained by the law of supply and demand (too much supply, less demand, less value). But if this is the case, then we are in big trouble and we could have been cheated!
What if a company intentionally cuts its production and limits its supply (Apple?). Would this cause the value and consequently the price to increase and would consumers be willing to pay the higher price? (some universities vs college?) What if there are more diamonds than we know, more supply and room than we know, and we are not aware of, and we keep paying the high price!
Some explain it by saying “the real price of every thing, is the toil and trouble of acquiring it”. Well, refined usable water is not easy to make, but is it cheap because it’s there whenever we turn the tap?
Now consider you already had a diamond necklace or a Bentley, how much would you pay for a second, third or fourth? Would you even want it? The price doesn’t change, its scarcity hasn’t changed, the cost of making it hasn’t changed, but the value decreases dramatically.
Another factor that’s important is income level. How valuable is a 20K dollar car to someone whose income is 20K a year, compared to someone whose income is over 100K a year. Some products are of more value to some people, and it’s up to you who you want to go after. low price, more people; high price, less people! low price = more demand, low price = lower perceived value.
The value of a product is the mental estimation a consumer 
makes of it.
It’s the relationship between the consumer’s perceived benefits in relation to the perceived costs of receiving these benefits.
Value = Benefits / Cost
Perceived benefits are composed of individual’s emotional, mental and physical condition plus various social, economic, cultural and environmental factors (qualitative measures). And also, it’s the actual gain measured in terms of financial numbers, percentages, and dollars (quantitative measures).*
Help consumers solve a problem, offer them a solution, give them results, and make them happy.
Value changes based on time, place and people in relation to changing environmental factors. Therefore keep watching…
Value changes based on time, place and people in relation to changing environmental factors.<<—-totally true. Either keep working on your skills til you can monetize it (time), relocate somewhere else where your value is perceived better and can be monetized better (place) or move around different circles of people for better synergy (people).
Well said, however I think what’s more important (and everyone needs to be aware of) is that value is based on *mental* *estimation* and consumer’s *perceived* benefits! : )