The "market price" set by supply and demand often is often unrelated to the historical cost of the good. Someone may have paid $300,000 for his house in 2006, when houses were relatively expensive, but the market price of that house in 2009 may be only $150,000. When that person tries to sell his house in 2009 it does not matter what he paid for it in 2006. All that matters is what the supply and demand for that house is when he tries to sell it. | The "market price" set by supply and demand often is often unrelated to the historical cost of the good. Someone may have paid $300,000 for his house in 2006, when houses were relatively expensive, but the market price of that house in 2009 may be only $150,000. When that person tries to sell his house in 2009 it does not matter what he paid for it in 2006. All that matters is what the supply and demand for that house is when he tries to sell it. |