What is market value?

The meaning of market value is the value of a good, product or service, determined by supply and demand of the market at a given time. It is the net amount that a seller could get from the sale of that service or product.

Other definition of market value is the estimated amount for which a property could be exchanged between a seller and a buyer in a transaction that takes place in full conditions competition, where participants act without coercion and with full knowledge.

The concept of market value is used more frequently in markets in disequilibrium situations, where market prices do not show the true real market value.

The market value is usually fluctuating, since it depends to a great extent on different variables that remain in constant movement. This is the case, for example, of the values ​​of inflation y devaluación. At a given moment, one objective may have more value than another, such as precious stones, while with the evolution of world economies it may lose its market exchange value.

Despite the fact that this term can sometimes be confused with market price, there are quite a few differences between the two. This last concept refers to the price at which transactions can be made, while in the case of market value, it is the real underlying value. Both will not always be the same.

Market value must also be distinguished from fair value. Fair value depends on the two actors who take part in a transaction, while market value does not. In addition, the reasonable one requires a certain price assessment, which is established by both parties, assessing the advantages and disadvantages that it will have for each of them.

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