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SOCB42H3 Lecture Notes - Barter, Factor Price, Market Price

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Dan Silver

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-1SOCB42 September 26 th
Why money exists:
1. Limits of barter
2. Money is whatever everybody wants
3. A) lasts b) divisible
4. Use value VS exchange value
[money tends to increase amount we exchange/trade. Creates probability of market price
going to be different than the use value]
Natural price: however much it costs to bring something to the market to sell [wages,
rents, normal profit]
Market price: how much you actually sell it for. When its different from the natural price,
people tend to adjust their behavior to make them inline with each other
Law of Supply:
Law of demand: there is an inverse/direct relationship between the price of a good, and
the amount of it buyers are willing to purchase. Higher the price, the more willing a seller
will be to sell it.
Effectual demand: not only do you want something, but you have the money to pay for it
Demand is higher than supply, then the market price is going to rise
Market order to work well:
1) liberty of motion:
2) liberty to change jobs
3) good information
Wont work:
1. Concealing high profits
2. Trade secrets
3. Scarcity [xmas trees in certain areas, it will be hard to many people to go in the
4. Monopolies [large companies will make the profit, little companies will suffer]
5. Certification
Different ways in which the produce of labour can be used:
Rent, profit, wages
Original state: page 91
Everything you produce is yours -
Share of produce Rent Profits Wages
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