Changes

== What is Irrelevant to Supply and Demand? ==

== What is Irrelevant to Supply and Demand? ==

Many things that you might think are important to the pricing of a good or service in the market are actually irrelevant.  Supply and demand by many people determine the price, and thus the preferences of any single individual are irrelevant.  The wealthiest person in the world cannot affect supply and demand any more than the poorest person can, in a free market.  Supply and demand transcends and is above the views, preferences, and buying habits of any individual or small group of people.

In learning what something '''''is''''', it sometimes helps to learn what it is '''''not'''''.  Put another way, listing what is irrelevant to an important concept can help illuminate what that concept really means.

Note also that supply and demand do not care who a person is or what his background may be.  The store owner sells a chocolate candy bar for the same price to the richest man in the world as to the poorest man in the world.  The President pays the same price as the most disliked person in town.  Supply and demand, and the free market, treats everyone fairly and equally.  Someone who walks into a candy store and offers to buy '''''all''''' the candy bars in the store may receive a slightly better price per candy bar because he is paying so much, but he won't receive any better treatment than anyone else, even the most disreputable person in town, who might also offer to buy all the candy bars in the store.  The free market responds to powerful economic forces above any possible prejudice, gossip, or personal preferences.

The preference of any single individual, such as yourself, is nearly irrelvant to the public supply and demand.  You may dislike the Yankees, but your own view is less than a "drop in the bucket" compared to the view of the public.  The opinion of the wealthiest person in the world does not affect supply and demand any more than the opinion of the poorest person can, in a free market.  Wealthy people may avoid Wal-Mart, but that did not keep it from becoming the greatest store in the world.  '''''Supply and demand transcends and is above the views, preferences, and buying habits of any individual or small group of people.''''' Supply and demand is like a massive ocean, and it's not going to change based on what a few people do.

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.

Note also that supply and demand do not care who a person is or what his background may be.  The store owner sells a chocolate candy bar for the same price to the richest man in the world as to the poorest man in the world.  The President pays the same price as the most disliked person in town.  Supply and demand, and the free market, treats everyone fairly and equally.  Supply and demand do not care about someone's status in society.  The free market is independent and above prejudice.  A restaurant owner is just as happy to serve, and makes the same amount of money, off the most popular person in society as the most disliked person in society.

The free market and supply and demand are similar to a sports competition.  It really doesn't matter how many trophies one team may have won in prior years, or who likes which side better, or who thinks which side should win.  All that matters is which team is better the day of the contest.  Likewise, all that matters to setting the price in a free market is the supply and demand at the time of sale.  In some ways that might seem harsh if it causes someone to lose money, just as it can be sad when one favored side loses a competition.  But in other ways this fair, because it gives full opportunity for someone to do well no matter who he is and no matter where he comes from.  As long as the seller obtains the free market price, he does not care who the buyer is.

 

The free market and supply and demand are similar to a sports competition.  It really doesn't matter how many trophies one team may have won in prior years, or who likes which side better, or who thinks which side should win.  All that matters is which team is better on game day.  Likewise, all that matters to setting the price in a free market is the supply and demand at the time of sale.  In some ways that might seem harsh if it causes someone to lose money, just as it can be sad when someone trains extremely hard to win a match, but is defeated in an upset by someone nobody likes.  But in other ways this fair, because it gives full opportunity for someone to do well no matter who he is and no matter where he comes from.  As long as the seller obtains the free market price, he does not care who the buyer is.

==Equilibrium & Information==

==Equilibrium & Information==