~Utility~
The term “Utility” in Economics is very important for understanding why the Kingdom’s Market prices can fluctuate to such extremes as they have been known to do. Utility for Economics purposes is a theoretical value, determining how much -use- (i.e. want/need) someone has for an item.
Even if an item has no practical use in a classic sense, people may have a higher Utility for items which they simply want very badly for various other uses. For instance, while a Flameblade is often not the greatest weapon at a person’s disposal they are highly sought after because of the status associated with owning one. Their rarity distinguishes the rich from the poor in that they can afford to expend more resources to own one, thus making them an item with high Utility for some and giving them a use in that they convey status. Every item has utility of some kind, ranging from very low (not placing much value or even negligible value on certain things) to very high (where a person is willing to go to significant lengths and spare no expense to obtain something). Judging utility is almost a subconscious act it is done so often and so quickly, although we are all aware of the value we place on the items we deal with.
Every buyer has some form of Utility for every item they buy, just as every seller has a level of utility for all the items they are selling. Even gold itself has a level of utility for everyone. When an item’s utility drops below the level of utility for the gold a person can get for it, they will invariably sell the item. Likewise if there are items which have a greater utility to a buyer then the gold it takes to buy it, he/she will buy the item. Time as well has a utility, every person places a certain amount of value as to what their time is worth. When a trade is taking longer then expected, the loss of time becomes a factor in the buyer or sellers decision to raise or lower their utility for their item(s). These principles apply to item trades, payment for services, or any other exchange as well.
It is the tradeoff between the Utilities of the seller and the buyer which determine the demand for an item. As a seller has a more and more difficult time selling an item, their utility will drop because of the inconvenience of a prolonged sale, causing them to lower their price until they can find a suitable buyer. Likewise if a buyer is unable to find his/her item at the price he/she wants, his/her utility for the item will increase as the purchase is prolonged while a seller cannot be found, causing him/her to increase the price he/she is willing to pay. The principle of Supply simply ties into this principle in that the more of an item on the market the harder it will be to sell, and as it gets harder and harder sellers will lose Utility and settle for less, the same applying to cases of low supply, with buyers increasing their utility as an item is harder and harder to buy. The balance of these two creates the “common” prices we are familiar with at any given time for the items around the kingdoms.
When prices change rapidly, it is often due to an increased or decreased utility among most people due to new technologies, items, innovations (affecting demand), or increases/decreases in supply.
When prices fluctuate so wildly that they fall outside of our acceptable price range, it is easy to blame the seller or buyer with whom we are dealing. Unfortunately, this is flawed logic, as if their prices were truely out of the ordinary you could simply do business with someone else for the price you wanted. They have no more control over the state of the economy than you do, and both buyer and seller are equally responsible for the agreed upon market price. Prices are not set by the individual, they are set by both parties in their agreement, and cannot simply be lowered or raised on a whim.
-Notorious
Scholar of Economics