How we produce and exchange the necessities of life. Market economy things are produced for exchange in the market place not for personal use (natural vs. exchange economy) 2 characteristics of a commodity: use value: meets a need. Some are fads i. e. , pet rock: exchange value: price/$ How is exchange value determined: the amount of labour time required to produce a commodity, under normal conditions of production in a given society, with the average degree of skill, the intensity of labour. Our mental and physical capacity to work. Workers legally free to sell labour power in marketplace. Use value: helps the capitalist to make $ Cost of means of survival of the worker. Cost of means of survival of worker"s family. Cost of satisfying social and cultural needs. = cost of labour power to produce labour power and the commodities need by family.