An economic question

[southernmissfan]

I thought this would be better suited for Learning, but hopefully some of the regular posters on the Theory and Economics boards will see it.

I know there continues to be debate around the Labor Theory of Value and the nature of surplus value. Honestly I have studied Marxist theory very little, I just don't have the time and I won't for quite a while. But I was wondering if my basic idea/understanding would be accepted (by most at least).

The capitalist will only the worker if the value they produce is greater/equal to the wage they are paid by the capitalist. The difference between the value the worker creates and the wage the worker is paid equals surplus value. Basically:

Value of good/service produced - wage of worker= surplus value

Let's say you are worker producing skateboards. Your labor is responsible for 5 skateboards an hour, which the capitalist sells for $20 a piece. You are paid $10 an hour by the capitalist. You produce $100 an hour yet are paid $10 an hour, leaving $90 an hour in surplus value for the capitalist. This difference, in conjuction with other variables is how the capitalist makes a profit. These other variables include things like obtaining the resources for less cost or innovation which leads to less cost. Of course, along every step of the way, whether it's the gathering of the resources or production of the actual factory or machines, surplus value of labor is extracted. So basically:

Price of the good - cost paid by the capitalist to produce the good = profit, with profit consisting of surplus value along with other factors such as innovation

Hopefully this made sense to everybody. One thing I still get confused about is what determines the price and/or value of the good. Obviously the first thing to consider is cost, which includes labor along with raw materials and other things. The cost lends at least an equal amount of value to the good, and of course the price must be more than the cost. I guess I don't understand what causes the value to rise above the cost. In other words, what creates the difference between the price and the initial cost-created value? Would that just be demand? If so, would demand just come down to necessity (or perceived necessity) along with "utility" and the artificial demand created through marketing?

Thanks in advance to anyone who helps out. I really don't have the time to go in deep and really study and analyze my political interests but I would at least like to know I am on the right track.

[Lynx]

Demand comes into play when price is being affected by supply. If the consumption and production of a commodity is equal, the supply of that commodity will remain stable. In this situation, price is a mainly a function of utility.

This is a rather poor explanation, but its the best I can do.

[Coggeh]

Their is quite obviously the supply and demand factor , but their is also the price elasticity of a certain product . For example oil has a high elasticity when it comes to price because it is an essential product , so even if the price is high the demand would not fall too greatly depending on how high you raise it .

This can be said for many others , alcohol , cigarettes and toilet paper . The capitalist seeks to make as much profit as possible so will always seek the highest return within reason . Sometimes its unprofitable to have a high price because of increased competition etc .

[Lynx]

Also of mention might be the approach used by some producers, that of high volume, low margin. This usually applies to mass produced commodities or commodities that would not generate enough revenue at lower sale volumes.

[southernmissfan]

So I'm assuming I'm correct...

[Lynx]

You're correct, just bear in mind that price can represent different market conditions. It can also be representative of the marketing strategies of producers and competitors.

[Invariance]

So I'm assuming I'm correct... If workers made skateboards out of thin air, then yes. Socially necessary labour means labour including the materials for the skateboard; so the material elements - i.e. wood, wheels, whatever & the 'wear and tear' used up in the tools to make the skateboards; a proportion of the value of sandpaper, hammer etc.

[Lynx]

Capitalists have been known to sell at a loss when engaging in a war of attrition with competitors. See Predatory pricing (http://en.wikipedia.org/wiki/Predatory_pricing).

[KC]

I thought this would be better suited for Learning, but hopefully some of the regular posters on the Theory and Economics boards will see it.

I know there continues to be debate around the Labor Theory of Value and the nature of surplus value. Honestly I have studied Marxist theory very little, I just don't have the time and I won't for quite a while. But I was wondering if my basic idea/understanding would be accepted (by most at least).

The capitalist will only the worker if the value they produce is greater/equal to the wage they are paid by the capitalist. The difference between the value the worker creates and the wage the worker is paid equals surplus value. Basically:

Value of good/service produced - wage of worker= surplus value

Let's say you are worker producing skateboards. Your labor is responsible for 5 skateboards an hour, which the capitalist sells for $20 a piece. You are paid $10 an hour by the capitalist. You produce $100 an hour yet are paid $10 an hour, leaving $90 an hour in surplus value for the capitalist. This difference, in conjuction with other variables is how the capitalist makes a profit. These other variables include things like obtaining the resources for less cost or innovation which leads to less cost. Of course, along every step of the way, whether it's the gathering of the resources or production of the actual factory or machines, surplus value of labor is extracted. So basically:

Price of the good - cost paid by the capitalist to produce the good = profit, with profit consisting of surplus value along with other factors such as innovation

Hopefully this made sense to everybody. One thing I still get confused about is what determines the price and/or value of the good. Obviously the first thing to consider is cost, which includes labor along with raw materials and other things. The cost lends at least an equal amount of value to the good, and of course the price must be more than the cost. I guess I don't understand what causes the value to rise above the cost. In other words, what creates the difference between the price and the initial cost-created value? Would that just be demand? If so, would demand just come down to necessity (or perceived necessity) along with "utility" and the artificial demand created through marketing?

Thanks in advance to anyone who helps out. I really don't have the time to go in deep and really study and analyze my political interests but I would at least like to know I am on the right track.

I highly suggest that you check out Marx's Kapital for Beginners (http://www.revleft.com/vb/marx-39-s-t41211/index.html). It is a great introduction to Marxian economics. I believe the section on Surplus Value (http://www.revleft.com/vb/showpost.php?p=619275&postcount=17) will answer your question.