VALUE AND THE CONSUMER 1. Suppose the consumer cannot sell.—In this chapter we shall consider the important subject of value entirely from the consumer's point of view. Since all goods are made to be consumed, their value to consumers is of decisive importance.
To the consumer the value of any article depends upon its utility, upon how much he wants it, upon how much satisfaction he expects to get from its con sumption. No man will pay a dollar for an article unless he believes he can get a dollar's worth of satis faction out of it. If he is choosing between different articles he will take the one that promises him the _greatest pleasure; that is, the one which seems to him to possess the greatest utility. One man, for ex ample, may spend his dollar for ten cigars, which he may consume in a day; while another would buy enough pipe tobacco to last him two weeks and think of the other fellow as possessing a foolishly extrav agant taste. The first man might get no pleasure from an ill-smelling pipe and condemn what he deemed the vulgar taste of the second. He might, however, refuse absolutely to pay more than ten cents for a cigar; and if the price of tobacco were advanced the pipe smoker might reduce his consumption or change to a cheaper brand.
To the producer the value of an article is closely related to its cost of production. He wants a price that will cover its expense of production. If costs rise he thinks values must rise.
To the trader, who neither produces nor consumes, the value of an article depends on the law of demand and supply.
In this chapter we shall leave both producer and trader out of consideration. We shall think of goods solely in relation to the consumer, and we shall assume that the consumer is not in a position to sell or ex change any of the goods in his possession. He buys goods for the satisfaction he gets out of them, but lie does not sell. For example, if each of six dear friends should give you a gold watch, all of the same make and quality, how much would you value each of' those watches? Of course if you can sell five of them you would value them all at somewhere near their market price; but suppose your conscience won't let you sell them because they are gifts of friendship, then 3,-ou would be facing the consumer's problem.
2. Utility of consumable goods.—A consumable good is one which gives pleasure or gratification directly to the consumer; for example, a suit of clothes, a fountain pen, a cup of coffee or tea, roast beef, the furniture in our homes.
The amount of goods consumed by a man depends upon his income as well as upon his tastes. While a man of ordinmy income might get great pleasure out of a high-powered automobile, yet its purchase and upkeep would make such a serious inroad upon his income that he would have to sacrifice so many other pleasures and comforts that the net result might be loss of satisfaction, and therefore discontent. Almost unconsciously men are weighing desire againSt desire, seeking to expend their money income in a way that will yield them the greatest psychic income. Each one of us is up against the law of diminishing utility just as a. farmer is up against the law of diminishing returns. A man who can satisfy only a few wants, or who is not wise enough to seek variety in consump tion, leads a monotonous life and is always liable to the evils of satiety and ennui.
Consumable goods are the ultimate objects of pro duction. The trees of the forest are felled in order that they may be made into houses, boats, furniture, etc. Some of them become the handles of axes, hoes and rakes or the parts of work wagons, but all these goods possess utility solely because of their usefulness in the production of consumable goods. The ax is not a consumable good except to a man who, like Gladstone, gets pleasure from chopping down trees.
3. Utility of capital goods.—The goods mentioned in the last two sentences ot the foregoing section are called by economists capital goods or producers' goods. Their utility is only indirectly related to human wants. Indeed, many of them are offensive to the senses no matter how desirable their final product.