Answer to Question #53079 in Other Economics for candy

Question #53079
Explain Karl Marx’s labor theory of value. In your explanation be sure to expand on the process of extended reproduction in the circulation of commodities (from C-M-C to eventually M-C-M’). Explain the component parts of value (c,v,s) and the rate of surplus value. What determines the rate of surplus value?
Expert's answer
The labor theory of value (LTV) argues that the economic value of a good or service is determined by the total amount of socially necessary labor required to produce it.
Marx employed a labour theory of value, which holds that the value of a commodity is the socially necessary labour time invested in it. In this model, capitalists do not pay workers the full value of the commodities they produce; rather, they compensate the worker for the necessary labor only.
The worth of a commodity can be conceived of in two different ways, which Marx calls use-value and value. A commodity's use-value is its usefulness for fulfilling some practical purpose; for example, the use-value of a piece of food is that it provides nourishment and pleasurable taste; the use value of a hammer, that it can drive nails.

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