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plentiful. These are expensive and difficult to produce and distribute, but those are cheap and easy. And we saw how high prices ration scarce goods, while low prices clear plentiful goods. MAN: But the market place is simultaneously sending messages back to the producer about the present state of demand. A busy stall tells the producer people want more of these than they can get. On the other hand, a slack period in the market tells him people don’t want these very much, with the result that high prices stimulate increased production, and low prices cause reduced production. WOMAN: So, price is always acting to encourage producers to produce the right balance of what customers want to consume, and to keep adjusting to every change in supply and every change in demand. It happens everywhere. Behind every price in a store there is a volume of information, experience, calculation and judgment. The manufacturer has worked out his production costs, estimated how many he could sell at various prices, and picked the price that gives him the biggest profit. MAN: But he’s competing with all the other manufacturers, and if his sales volume starts to drop, the message will get back to him fast. If it’s a big change- it may mean a big rethink, and a big change in the price. WOMAN: It might even put him out of business. A lot of manufacturers of hand-wound watches had to do big rethinks when electronic watches came onto the market at a fraction of the price. MAN: But it also works the other way. In the 1970s, during the UK bread strike, bread prices shot up. But people still wanted to buy bread. This stimulated others to hire trucks and import loaves from Holland. At the normal price, transport costs were too high to make bread importing worth anyone’s while. But when scarcity doubled the price, it was a very different story. WOMAN: In the same way, the quadrupling of world oil prices in 1974 made other kinds of energy production more attractive to producers. Offshore oil, coal, nuclear power, wind power, they all had been rated too expensive, but that only meant compared with oil. So, when oil prices shot up, it became worth people’s while to pay the extra production and distribution costs, because they could now charge pricesthey never could have charged when oil was cheap. MAN: The high oil price did what high prices always do-- discouraged and rationed the consumer, but encouraged and stimulated the producer. WOMAN: What happens is this: When the price is high, people are encouraged to produce a lot. MAN: But after the first rush, you won’t get many customers, because the high price puts them off. You’ll have a lot of unsold goods. As the price drops, fewer people think it’s worth producing. But more people think it’s worth buying, and so it goes on. WOMAN: About here, you reach a point of balance, a price which stimulates the production of just about the amount that customers will buy at that price. If the price goes on downwards, more and more producers will be discouraged, but at each falling price stage- more and more people will want the goods. MAN: That’s when you get fights, queues and black markets. This price, the one in the middle, is called the equilibrium price, the price most goods settle down at. WOMAN: So, just as we saw in the last program that there’s a law of demand. There’s an equally important law of supply…it’s this: 42
MAN: The higher the price offered, the greater the quantity supplied… WOMAN: Or if you prefer…the lower the price offered, the smaller the quantity supplied. MAN: And like the law of demand, the law of supply applies to this and every other market you can think of. 43
Page 1 and 2: TRANSCRIPT 2002 Filmore Avenue Erie
Page 3 and 4: MAN: And everybody seems to be depe
Page 5 and 6: MAN: Don’t worry. It’s bound to
Page 7 and 8: Division of Labor 1: Product MAN: U
Page 9 and 10: WOMAN: The Tailors. MAN: Right! WOM
Page 11 and 12: Division of Labor 2: Process MAN: G
Page 13 and 14: MAN: He says a trader is somebody w
Page 15 and 16: TRADER: Oh, champion. WOMAN: There
Page 17 and 18: WOMAN: And we even managed to put s
Page 19 and 20: WOMAN: It adds up to a surplus. The
Page 21 and 22: MAN: Yes, and as a result: eight fa
Page 23 and 24: MAN: And for all but a few thousand
Page 25 and 26: WOMAN: And they spent all those eve
Page 27 and 28: MAN: Remember that first day The Fi
Page 29 and 30: Money MAN: It worked very well at f
Page 31 and 32: MAN: …time and energy which we ou
Page 33 and 34: MAN: To stop that, they specially m
Page 35 and 36: MAN: Trouble was they were just lik
Page 37 and 38: MAN: And there we were at the end o
Page 39 and 40: Supply, Demand and Price 2. Price a
Page 41: WOMAN: Yet, the surprising thing wa
Page 45 and 46: MAN: But would you believe it They
Page 47 and 48: everything. And we saw how hardship

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