Market applications
| Group activity: Market Applications Assignment, December 2022 and complete this Market Applications Form |
| Instructor resource: Market Applications Solutions, December 2022 |
This topic is all about how market exchange generates prices, which can be used for information purposes. Here is a good quote explaining the marvel of the price mechanism:
“A spike in wages of carpenters, in a uniquely reliable way, tells consumers that the community needs them to be more economical in their use of carpentry services while also alerting potential suppliers to a rising need for carpenters. Falling prices, again in a uniquely reliable way, signal suppliers that a community already has all it needs. From such coordination, mediated by freely adjusting price signals, a nation’s wealth is made” (Schmidtz, 2023, p. 102)
In 2025 the city of New York introduced a congestion charge in the whole of lower Manhattan to try to reduce traffic.
As The Economist reports, early results revealed that rush hour journey times had been cut in half.
Recommended listening:
- Special Episode 12: Jen Dirmeyer – What Do Markets Do For Us? The Curious Task, July 27th 2022 – Jen Dirmeyer talks about the marvel of market order, with a particular focus on the incredible coordination that takes place to deliver consumer goods in contemporary society. She points out that supply curves reflect the best alternative use of resources and demand curves reflect the best alternative way of satisfying consumer needs, and in doing so rest on the same underlying logic. Also, I really liked Jen’s emphasis on an important downside of the reliance on market exchange – people with higher incomes, or higher budgets, are at a significant advantage over those less fortunate. This is indeed a social problem but the choice between economic systems is a choice between one that emphasises economic power versys one that emphasises political power. And the former may well be more egalitarian overall. Because economic wealth creation is positive sum, and therefore one person’s advantage need not come at the expense of another’s.