Developments in Major Fields of Economics
Edited by Gilbert Faccarello and Heinz D. Kurz
Transactions in which an individual, household, firm, government, or other economic entity (“the buyer”) purchases something (usually with money) from another economic entity (“the seller”) are widespread and familiar events in many societies. Economic theory describes the exchanged “thing” or “item” variously as a “good”, an “asset”, or a “commodity”. The term “good” emphasizes the usefulness of the thing exchanged to the buyer or some ultimate purchaser of the item in a chain of transactions. The term “asset” emphasizes the fact that the seller owns and controls the item, and has the legal right to transfer ownership to the buyer. The term “commodity” has a narrower sense of a good produced with the intention of selling it in a system of production organized through exchange. “Price” is the commonly used term for the amount of money exchanged in such a transaction for the item. By extension, the term “price” is often used to describe a standing offer to make such transactions, whether there is an actual transaction or not. In the rarer case of barter transactions, in which one non-money item is exchanged for another, the ratio in which the items are exchanged is often described as the “relative price”. Economic arguments that abstract from the mediation of money in exchange are often couched in terms of relative prices.
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