Supply and Demand
Prices are a form of communication. They indicate the judgment of society as to the value of something. Just as the ability to dunk from the free throw line is valued 50 times higher than the ability to educate our children, diamonds cost substantially more than water. Although teachers and water are more important than basketball players or diamonds, their respective values are determined by their supply.
If teachers were as rare as NBA quality athletes, teachers would make a LOT more money. If water were as rare as diamonds, there wouldn't even be time to fight a war over that small supply. Everyone out of supply would die. The supply of water would become the most valuable thing the world has ever known.
Demand also effects price. A man with no children has no demand for someone who can teach them. Conversely, someone with children and a desire to educate them will pay for a teacher. How much depends on a lot of different factors. Combining people in this situation, with all of their various factors which determine how much they are willing to pay, combined with the relative supply to the existing demand...all of that determines prices.
Both supply and demand are constantly changing. The high price of something might cause the supply to go up, which will eventually make the price go back down. The high demand for something will make the price go up, which will eventually make the demand go down. The low supply of something makes the price go up, which makes the supply go up, which eventually makes the price go down and the supply go down.
Price is an ever-changing number, where every change indicates another change in either supply or demand. The price of something is the communication between buyer and seller. Buy more/Make more or less of each? The price answers the question and the market responds.
Free market capitalism could have been called the competitive price system. That is actually a more descriptive name for what it represents. It is a system that summarizes the results of millions of decisions into a number that the next million decisions will be based upon.
Prices are the verdict of decisions made by millions of different people, each acting in their own self interest. Free market capitalism is the purest form of real democracy.
If teachers were as rare as NBA quality athletes, teachers would make a LOT more money. If water were as rare as diamonds, there wouldn't even be time to fight a war over that small supply. Everyone out of supply would die. The supply of water would become the most valuable thing the world has ever known.
Demand also effects price. A man with no children has no demand for someone who can teach them. Conversely, someone with children and a desire to educate them will pay for a teacher. How much depends on a lot of different factors. Combining people in this situation, with all of their various factors which determine how much they are willing to pay, combined with the relative supply to the existing demand...all of that determines prices.
Both supply and demand are constantly changing. The high price of something might cause the supply to go up, which will eventually make the price go back down. The high demand for something will make the price go up, which will eventually make the demand go down. The low supply of something makes the price go up, which makes the supply go up, which eventually makes the price go down and the supply go down.
Price is an ever-changing number, where every change indicates another change in either supply or demand. The price of something is the communication between buyer and seller. Buy more/Make more or less of each? The price answers the question and the market responds.
Free market capitalism could have been called the competitive price system. That is actually a more descriptive name for what it represents. It is a system that summarizes the results of millions of decisions into a number that the next million decisions will be based upon.
Prices are the verdict of decisions made by millions of different people, each acting in their own self interest. Free market capitalism is the purest form of real democracy.
posted by BoiseJag at 7:02 PM
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