“We might as reasonably dispute,” Alfred Marshall wrote in his famous economics textbook first published in 1890, “whether it is the upper or the under blade of a pair of scissors that cuts a piece of paper, as whether value is governed by utility or cost of production.”
Prices are determined in the marketplace, through the communication between buyers and sellers, jointly through a negotiation reflecting their willingness to pay, and their costs of offering. Marshall offered us these tools, the demand curve and the supply curve, to understand price determination in perfectly competitive markets. And he also characterized them, and used them to illustrate price determination in a wide variety of examples.
As a part of this he introduced the notion of “elasticity,” a concept that Congresswoman
And so this week’s class in our course, Economics for Everyone, is about elasticity. If she can understand it, so can you. If she can use it, so can you. And that is what we do in the lecture: define the concept, and show how it is used to understand market outcomes for some policy relevant examples.
Download the presentation for Lecture 6, “Understanding and Using Demand and Supply Curves” as a pdf, and if you like listen to narrated version.