Many people do not know why an iPhone costs more than a loaf of bread. Nor do they have any idea why consumers in this market value the iPhone over a loaf of bread and are willing to pay more for it, notwithstanding paying a higher price. We need bread to live, but not an iPhone. The paradox between the value of bread versus the value of an iPhone is not a mere subjective analysis — in reality, we know through experience there is a price differential between a smartphone and a loaf of bread. In a free market economy, where individuals make their own choices, customers buy what they value the most. There are no kings or queens of the marketplace that hold sway over what people prefer to more or less satisfy their wants and needs. However, some think differently because they do not understand how the economy really works. These are the people who prefer to make an iPhone the same price as a loaf of bread and force consumers to buy more loaves of bread instead of an iPhone.

For instance, Shira Ovide, author of the article “Why we complain about egg prices but can’t stop buying $1,000 smartphones,” thinks that people value eggs over smartphones, and guess what? They do not. Instead, Shira should have asked: Why do people choose to spend a higher premium on a product such as an iPhone than on a life-supporting food, like bread? Under Ovide’s logic, wheat, manufactured into bread, should be double the price of an iPhone as we need bread to eat and nourish our bodies; a smartphone does not sustain human life, but it does however satisfy subjective goals and desires.

Consumers who complain about the rising prices of eggs (or bread) think something sinister is at play in the marketplace. It is simple. Consumers, in this economy, find more value in iPhones than they do a loaf of bread. The market does exactly what it is supposed to do: put customers’ demands in a form that suppliers understand.

What goes unnoticed is an iPhone’s high market value compared to the use value of a loaf of bread. A loaf of bread has a lower market value than the benefits of an iPhone. How much satisfaction from a loaf of bread would equate to the satisfaction of an iPhone? We may never be able to quantify the measure of subjective satisfaction, but we know if people are hungry enough, a loaf of bread does in fact become more valuable than an iPhone.

The reality is this: most people I know place a higher market value on an iPhone than the nourishment of food, like bread. But, like noted above, if these consumers are hungry enough, bread becomes more critical than their iPhones. Yet, without the pressure of starvation bearing down on us, we cannot forget the fun of an iPhone that cannot happen with a loaf of bread. With an iPhone, one can download, upload, purchase video games, take pictures, listen to podcasts, or read this fun article like you. Consumers cannot do any of those fun things with a loaf of bread (and if you can, please let me know).

Higher and lower prices tell consumers like you and me what we value the most at a particular point in time. In other words, bread has a low market value, and the iPhone has a greater use value.

The buyers of bread and iPhones are the same person but at various times. Consumers are not bound by any external force to make a particular choice, therefore we cannot object to where people place their values. They are free to forgo the satisfaction of bread for the ultimate satisfaction of all the incredible features of an iPhone. Who can argue that an iPhone is more important and satisfying than a ham sandwich? This paradox shows the subjective preferences held by the buyer when they are free to make their own choices. In a market economy, the importance of subjective preferences in determining market prices cannot be overstated. We are all bidders in this magnificent marketplace, and I am only one bidder out of millions of people. We cannot measure the internal satisfaction one consumer receives from bread compared to an iPhone or vice-versa; these data are subjective and reflected in the prices of things. So, we can cry over spilled milk or the high prices of bread and eggs, but the market is doing what it is supposed to do when unhampered.

Image: Free image, Pixabay license.