Week 2 - Market Basics
Day 1 - Getting Started
Day 2 - Market Basics
Specialization, Wealth and Transaction Costs
Day 3 - The Why and How of Markets
Subjective Value and the Labor Theory of Value
- 10. How is the economic value of something determined?
- One person might value something more than another. I would not value Barbie doll cards (used in book), yet someone else might.
- 11. Why is economic value NOT ONLY “in the eye of the beholder”?
- Economic value is also what someone else would be willing to give for it, not just how much I value it.
- 12. What did Karl Marx’s labor theory of value suggest?
- The amount of labor per into something determine it's worth.
- 13. Why does Marx’s prophecy (that Capitalism would destroy itself) hinge on his “labor theory of value”?
- Because he thinks that everything worth is based of labor, so he thinks everything will even out and no one will make money and just even out.
- 14. What fundamental truth did Marx not understand that gave rise to his flawed labor theory of value?
- you can't define economic value to labor
- 15. As the author states, the word “value” has several meanings; what is the difference between “economic value” and “ultimate value”?
- Economic value is what people are willing to give for something, while ultimate value is what it's worth.
Day 4 - The Wonder of the Market Order
Private Property, Providence and Prices
- 16. What do we need to have in order to “play” in the free-market?
- Have something someone else wants.
- 17. Why is ownership and a formal private property system the key for unlocking the mystery of capital?
- Not legally owning something makes it harder for it to be an asset. Without it being an asset it is not much use for long term gain.
- 18. What did Adam Smith believe about the invisible hand and God’s providence over human affairs?
- That God has His hand in the market and guides it as He pleases for the best.
- 19. What is the central mystery and wonder of the market order?
- We can learn the economic value of everything but only through the market process that leads to a specific price.
- 20. While not utopia, what does emerge from a free-market economy regulated by prices?
- A more complex and diverse order than any human planners can or will conceive.n
- 21. What are the three marvels that Leonard Read’s essay, I, Pencil, illustrate?
- 1. few who contribute to the pencil meant to make the pencil. 2. not one person knows how to make a pencil, the knowledge is dispersed across the earth 3. no human mastermind overseas the process
- 22. Is capitalism responsible for the creation and fostering of unfair and ruthless competition? Why or why not?
- No, everyone will either win or lose from trades. It is up to them to determine how it goes.
Day 5 - The Role of Prices
Coordinating Changing Choices
- 23. A graphic representation of the law of demand shows the demand curve sloping downward to the right. What does this indicate regarding the demand of consumers?
- They do not desire it as much anymore.
- 24. What direction does the supply curve slope and what does this indicate about suppliers and producers?
- Up, they saw the demand was high and tried to produce to meet it.
- 25. What coordinates the choices of consumers and producers and brings them into balance?
- 26. The forces of supply and demand can be clearly seen on what popular internet marketplace?
- 27. The text states, “When the equilibrium price is present, units will be produced and purchased as long as the value of the good to consumers exceeds the cost of the resources required for its production." What do market prices do beyond bringing the quantity demanded and the quantity supplied into balance?
- To make producers supply what consumers value more than what they're worth.
- 28. What is the miracle of market communication and coordination?
- Being able to accomplish a pattern of cooperation that can't be made by planning.
- 29. Fill In The Blanks Below
- Because the world is constantly changing, and demand and supply curves constantly shift, equilibrium is a moving target .
Demand and Supply by Dwight Lee