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CMA Foundation · Fundamentals of Business Economics and Management · Utility, Wealth, Production

Which of the following is the best reason why the money in a person's pocket is counted as wealth, but a rare painting that nobody wants to buy at any price may not be?

The unwanted painting lacks utility, meaning there is no demand for it, so it has no exchange value even though it is scarce. Money is accepted by everyone and so has utility and exchange value. Scarcity alone does not make a thing wealth without utility.

  1. AMoney is heavier than the painting
  2. BThe painting lacks utility or demand, so it has no exchange valueCorrect
  3. CMoney is produced by the government
  4. DPaintings cannot be transferred

Explanation

Wealth requires utility, scarcity and transferability, and these together give exchange value. A painting that nobody values has no utility in the market sense, so it lacks exchange value even though it is scarce. Money has utility as a medium of exchange. Paintings can be transferred, so option four is wrong.

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