The main topics on yesterday's session were land and labour.
We started with a small revision of what we did on the previous meeting: 7 levels of Social Structure. This time we learned that the family level is based on a system of gifts. Usually members of a family don't offer each other deals like "I'll pay you 40 pounds and you'll cook a great dinner for me" or "I'll do this only if I get some benefit from it". No, we can say that in a family our actions are similar to a particular gift - mum is going to cook breakfast without any minimum wage and children are going to clean up their rooms without any exchange for that like a new skateboard.
It used to be true that communities also had a system of gifts instead of traiding. Communities used to be like a big family, where everybody's aim was not a gaining something from a deal. But it was a long time ago. Let's take Oxford city nowadays as an example of community. Imagine, you enter a shop and ask "Can I have I bottle of Red Bull please?". The salesman will ask you for money to exchange them on Red Bull - he won't give it to you without money, obviously.
Then we were talking about a few aspects of market economy and after that we started, in my opinion, a very interesting topic - connections between Supply, Demand, Land and Labour. I think this can be called one of the basic things in economics - this is where a price is set. But I'll talk about prices a little bit later.
Coming back to Land, Labour, Supply and Demand.
First, land supply doesn't respond to demand. Well, it's obvious, but still sometimes people forget about it. If demand on land increases that doesn't mean that there will be more land because it's limited. This is called fixed or limited supply. I'm talking about Land in general, but if we take a particular territory, let's say some land near London city, the situation will be different. There can be more supply of this land but only if supply of some other land will be less. So, if there is a forest near London, there can be built some suburbs, but there will be no forest anymore. So opportunity cost in this case is a forest, which will be cut off just to be replaced with some houses.
Second, there is a competition in labour market between people who want to get a job. Once again, I'm talking about general things - usual jobs. There are lots of lawyers, for example. They all want to get a job. But because there are lots of qualificated lawyers, employers can set up really low wage - there will be some people who will agree to work for this wage. Others, who deny this low wage, just won't get a job, so next time they will have to agree to work for a small amount of money.
And now... prices!
What we can say about price? Price is an equillibrium point, where supply and demand curves intersect. This price is set not just because producers supply people with exact number of particular good which is going to be bought.
There is a so called 'bottom price' for the producer - it equals production cost of a good. If price is lower this point, than the business in useless - you'll spend more on production than you'll get for this good. If producer sells a good at a bottom price, he will just get the money that he spent on production back.
There is also a 'top price' - it's the highest price that could be reached without decreasing demand, a consumer still buys a good, but if the price is set up higher, a consumer will not buy this good.
The optimum price is called "exchange price" where both consumer and producer are happy with what they get after exchange.
A rule of exchange:
Each party must want to get something more than it wants to give.
Both consumer and producer have two values:
- a value of what they have
- a value of what they want to recieve.
So there are four values in exchange of two people.
One thing is very important - price itself is not a value, price is just an amount of money.
Now I'm going to tell you about circle of land. Think about any good that we have. It's all produced by using land. There is no good which was produced without using land. Not neceserally that land was used directly.
So, the circle of any good looks like this:
LAND - Natural Resources (you must have knowledge about it and access to it) - Extraction - RAW MATERIALS - Processing - INTERMEDIATE GOODS - Manifacture - FINISHED GOODS -Distribution - GOODS IN USE - Depreciation - OBSOLESCENE - Dissolution - LAND.
Think about it - it happens to any good: starting with your laptop and ending with a can of Red Bull.
That seems to be all.