Chapter 1
Wheelan spends a lot of time talking about the free market in this chapter. He begins to explain how and why goods are allocated in the free market. I thought this was very interesting. Wheelan is basically saying that even though producers are putting the price tags on goods, it is the consumers putting the actual price on the goods. Prices go up and down based in what the consumers are willing to pay. This ties in with supply and demand. If there is a lot of one good, not only are the consumers going to find it for the lowest price, but the producers are going to do what is necessary to get the products off the shelves. A good example of the control consumers have over the free market is gas prices. Gas prices fluctuate based on its availability, true, but they also rise and fall based on what consumers are willing to pay. Quite often, gas prices are slightly higher in the summer. This is because more people are traveling, and therefore need gas. Travelers will pay whatever they need to (within reason) in order to ensure that they get to their destination. This means that the producers of the gas can raise the prices of gas a little and consumers will still pay for it.
"Economics starts with one very important assumption: individuals act to make themselves as well off as possible" (6).
ReplyDeleteThroughout this chapter, Wheelan talks about people who make a difference, set an example, people all around the world and people right here at home buying cakes for their dogs. There is an obvious reoccurring theme, WE are the ones with the influence; not some people in DC or CEOs sitting behind their desks. Everything always comes back to the wealthy people buying "luxury goods" and those people who are chopping down rain forests to buy malaria nets. You as an individual have more power in your hands than most realize, and with that comes the responsibility of attaining what everyone else wants. But the problem with that is that most people (if not all) only seek for things for their benefit, we all have our "preferences" that shape or understandings and desires.