Economics U$A: 21st Century Edition
The return of U.S. troops from overseas following World War II created a massive demand for cheap housing. Rising labor and energy costs in the United States in the ’60s and ’70s forced domestic steel manufacturer NUCOR to find ways to lower production costs. In 2009, rookie pitcher phenomenon Stephen Strasburg signed the largest rookie contract in baseball history. These stories show how a well-functioning free market pricing system determines how producers manufacture goods, what they will pay, what goods will be manufactured, and for whom the goods will be produced.
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To show how a well-functioning free-market pricing system determines how producers manufacture goods, what goods will be manufactured, and for whom the goods will be produced.
- The meeting of buyers and sellers in a market can be represented by supply and demand curves. The curves show what sellers are willing to sell, and buyers are willing to buy, at various prices. In a perfectly operating market, the intersection of the supply and demand curves will be the point at which buyers and sellers agree on the price and quantity.
- Goods are produced by using resources such as labor, machinery, and materials. The prices of these resources are set by supply and demand in the free market. The producer is forced, by competitive pressures, to choose the method of production that is least costly, i.e., the method that conserves high-priced materials.
- Consumers “reveal” how much they want a good by the way they spend their money. If a great deal of money is being spent on a certain good, producers will try to make more of that good. If consumers change the way they spend their money, producers will respond.
- There is a difference between “need” and ”effective demand.” The market system only responds to those who have money to spend. The poor have the need for many goods that the free market system will not provide for them because the market system only responds to needs for which people spend money.
Meet the Series Experts
Jacques Barzun Professor in History and the Social Sciences at Columbia University, specializing in urban, social, and military history. Previously, he served as an Assistant Professor for the Air Force Institute of Technology at Wright-Patterson Air Force Base. He has also served as President of the Urban History Association, the Society of American Historians, the Organization of American Historians, and the New York Historical Society. His published works include American Vistas, Cities in American History, and Crabgrass Frontier: The Suburbanization of the United States. Dr. Jackson received his B.A. from the University of Memphis and M.A. and Ph.D. from the University of Chicago.
Owner and President of the Boras Corporation, a sports agency that represents many of the highest-profile players in professional baseball. He has brokered record-setting contracts since 1982 and many of his clients, including Carlos Beltrán, Matt Holliday, Daisuke Matsuzaka, Magglio Ordóñez, Manny Ramirez, Stephen Strasburg, Mark Teixeira, Jayson Werth, and Barry Zito, are among the highest-paid in the game. Mr. Boras received his B.A. from the University of the Pacific and L.L.B. from the McGeorge School of Law.
Robert W. Crandall
Senior Fellow in the Economic Studies Program of the Brookings Institution, specializing in telecommunications and cable television regulation, the effects of trade policy, environmental policy, and the changing regional structure of the U.S. economy. He is also Chairman of Criterion Economics. He has taught economics at Northwestern University, MIT, the University of Maryland, and George Washington University, and at the Stanford in Washington program. Prior to assuming his current position at Brookings, he served as Deputy Director for the Council on Wage and Price Stability. Dr. Crandall received his M.S. and Ph.D. in Economics from Northwestern University.
- equilibrium price
A price that shows no tendency for change, because it is the price at which the quantity demanded equals the quantity supplied. The price toward which the actual price of a good always tends to move.
- market demand curve
A curve, usually sloping downward to the right, showing the relationship between a product’s price and the quantity demanded of the product.
- market failure
Inefficient allocation of goods and services by the market. Efficient allocation of goods and services means there is no other outcome under which a market participant can be made better off, without making someone else worse off. Market failures are often used as a justification for government intervention in an economy.
- market supply curve
A curve, usually sloping upward to the right, showing the relationship between a product’s price and the quantity supplied of the product.
- market supply curve for labor
A curve showing the relationship between the price of labor and the total amount of labor supplied in the market.
- methods of production
Processes and techniques used to manufacture a product.
- shift in demand
A change in the quantity of a good or service consumers are willing and able to buy at every price level.