Trade is fundamentally barter; the money economy and the credit economy sprang from the barter economy. Under the money economy one commodity possessing the quality of general acceptability was exchanged for any other commodity. The barter nature of such transactions is obvious. Credit simply introduced the idea of exchanging present commodities against future commodities; if credits are offset by credits, the ultimate payment of balances is in kind or money. The person who sells shoes for money or credit gets, in real fact, commodities which the money or credit commands. Exchanges are, then, goods for goods; and the amount of one kind of goods given for a unit of another is the price of the latter. Since goods are generally exchanged for gold or representatives of gold, prices are usually stated in terms of gold, and price becomes the quantity of gold for which a unit of an article will exchange.

Commodities serve in different degrees the wants of man. The capacity to satisfy a want is known in political economy as "utility." The utility of any unit of a commodity decreases as the number of units of that commodity increases. The utility of a unit more or less than any given group is spoken of as "marginal" utility. The asking price of any commodity will depend upon the ratio of the marginal utility of the commodity and the marginal utility of gold, that is, money, to the seller; the bidding price is likewise the ratio of these utilities to the buyer. When a sale or purchase takes place there is an equalization of these ratios of utilities, at a "price." In any market where buyers and sellers compete freely there can be but one price for a commodity at any time; this resultant price is the "market price."