"Market value" is an economic term used to describe the natural price that a particular good or service has in a particular market at a given point in time. A number of different determinants contribute to the market value for a good or service. These determinants can cause the value of that good or service to fluctuate.
Supply and Demand
The supply for a good or service is the willingness and ability for firms or individuals to furnish it to the market at a particular price; the demand for a good or service is the willingness and ability for buyers to purchase it. When economists illustrate supply and demand, they do so by displaying them as two lines on a graph, with the supply curve usually sloping upward and the demand curve sloping downward. The horizontal axis of the graph displays the quantity of the service or good, while the vertical axis displays the price. The point at which these two curves intersect is the market value. This intersection shows the number of units the market wants to buy and the price that the market is willing to pay.
Fluctuations
The supply and demand curves for a particular product in a market are never fixed. When a natural disaster occurs, for instance, certain goods may become scarce, which causes the price to rise. Even if the supply level remains constant, other goods --- such as generators or bottled water --- may experience higher levels of demand due to this natural disaster; this causes the price to rise as well. In contrast, when more firms enter the market and start selling the same types of goods that existing firms are selling, the firms lower their prices so that they can compete. This causes the market value for those goods to fall.
Artificial Constraints on Market Value
Governments sometimes force sellers to sell their goods for less than what the market is willing to pay --- this is called a price ceiling. The purpose of price ceilings is to keep sellers from taking advantage of the needy by charging exorbitant amounts of money for necessary goods. However, economists argue that such price ceilings only result in shortages of those necessary goods because it causes sellers to be less willing to meet demand.
Another artificial constraint on market value is taxation. Whenever governments levy taxes on goods or services, this results in an artificially high price, which causes buyers to purchase less than they otherwise would.
Creating a Perception of Value
When two companies provide products of similar intrinsic value, they may compete by investing in further research and development to make even better products. However, certain products, especially food and beverage products or clothing, simply can't become any better. In situations like this, companies often compete through marketing. They may use advertisements, slogans and recognizable labels to assert a certain level of value for their products. Even when such a company keeps producing products of similar intrinsic caliber to those produced by its competition, they may command a higher market value because the company has created a perception of value in the eyes of consumers.
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