When the Soviet Union, which had been a command economy, broke apart, an official of the new Russian government called an official of the American government and asked” “Who is in charge of bread distribution?”
It took a few minutes for the American official to fully understand the question. But when he did, he answered: “No one.”
The Russian could not understand that. How can wheat be grown, ground into flour, baked into bread and distributed to stores without the government telling everyone what to do?
Use your knowledge of supply and demand, the Invisible Hand (the price system) and free markets to explain to the Russian official how this process works. You can use multiple posts and discuss and illustrate each step of the supply chain. Or you may focus on the consumer-retailer-baker part of the supply chain. Either way be clear and specific about how the changes in demand lead to changes in supply at each stage.
This is a true story. The Russian government really did call America and ask how to distribute bread in a free market system. How that is done is so normal for us, that we probably don’t even think about it. But now is a good time to think about it and obtain a better understanding of free markets, the Invisible Hand, the Price System and supply and demand.
Review the Supply and Demand Guide Supply and Demand Guide – Alternative Formats and the Supply and Demand PowerPoints Supply and Demand PowerPoints – Alternative Formats before you start
Review chapter 4 in your text book
Then consider the multiple steps (markets) involved in producing and distributing the loaves of bread that you find in your local supermarket. Explain to the Russian official how the free market accomplishes this rather impressive task.
You can use multiple posts and discuss and illustrate each step of the supply chain. Or you may focus on the consumer-retailer-baker part of the supply chain. Either way be clear and specific about how the changes in demand lead to changes in supply at each stage.
Remember to refer to the appropriate graph(s) in the Supply and Demand Guide as you examine the various markets involved. If you wish to draw an appropriate graph and attach it to your post you may, but that is not required. (If you do, be sure to explain the graph in your post – but don’t attach your post, just the graph)
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