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In our second class, we find markets everywhere and discuss what makes them work and when they fail.
We start off with the basic tools to understand a market: supply and demand. We find that the price of an item isn't just about money; a price reflects all the information inside a market, from a buyer's willingness to pay to a supplier's cost to make that item.
Then, we put the concepts to work with the parable of the pickles. A food bank in Alaska gets sent a truckload of pickles, more than it could ever use. A food bank in Idaho gets sent a truckload of potatoes, the last thing it needs. With the help of economists, the food banks figure out a way to create a trading market, complete with information sharing and prices. We see how that works out as the food banks compete for the most coveted prize of all: a shipment of breakfast cereal.
- Supply and demand
- Local knowledge problem
- Gains from trade
- Information asymmetry
- Pick an organization that you know well, maybe even your workplace. Are the decisions made from the top by people with limited information or are decisions made at the local level? Now imagine how that organization could change. Tell us about it. #PMSummerSchool
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