Saving "the Market” out of Cambridge: “Demand Curve”

 

Back home after spending the afternoon hours in the library, Alicia faces a dishful of sushi prepared by loving Mom. Alicia, the rational, never grabs several pieces handful. She takes piece by piece, each in its entirety. She never leaves uneaten half, not to mention one thousandth (1/ 1,000) thereof. In economics jargon, the piece as in the dish is the “marginal” unit. 

There is no question that she is crazy for the very first unit of sushi. The question: Is there any cost taking the first? Yes of course, nothing good comes for free. Yet, the cost of preparing sushi is irrelevant because it is already “sunk.” The relevancy comprises of gaining weight, mouth smell, getting many things around dirty and the feeling of fullness. Wait; does her time at dinner come for free? Never, the time (duration) is the most valuable currency for all of us with limited time of life. Time is the most critical cost because she has many other things to do at each “moment” of life.

Is her appetite constant through the dining process? No, never. The first few are more than delicious but the taste or “preference” gradually dwindles down for many reasons not excluding the limited stomach capacity. By providence, the marginal benefit of eating sushi is to decline.

Is her marginal cost of eating sushi constant? No, never. The marginal cost is to increase by providence as well.

With the declining marginal benefit on one hand and the increasing marginal cost on the other hand, she is ready to gracefully clap: eight pieces of sushi, no more, no less. There she is in equilibrium!

Very nice with the benefit curve, the cost curve and the meeting point, but for that the story is personal. Nevertheless, there is the accounting period, that is, the dinner time of day after day after day. Such periodicity is a matter of life of all creatures.

Every Thursday of the week, her Mom goes grocery shopping to the communal marketplace. We choose the apple as the example of many items to be “purchased.”

First, Mom is to buy apples in pieces, never one tenth or anything smaller. In other words, the natural piece is the marginal unit in the apple market.

Second, we can easily guess that the marginal benefit as for “the household” of Alicia et al. is declining.

Third, Mom always and everywhere pays with the US dollar, legal tender, if in the US. In other words, the dollar is the unit of account as for all prices, that is, the costs of all “purchasing.” No wonder, the dollar has the “purchasing power” and is rendered the title of “medium of exchange.”

Fourth, we can draw the household’s demand schedule, the marginal benefit in dollar terms on the ordinate vs. the marginal units on the abscissa. The schedule must slope downward as the marginal benefit declines. Here, it shall be noted that the schedule is discrete, never continuous, vitiating any effort of “differentiation” in mathematical jargon.

Finally, we have the communal demand curve for the week via “horizontally” aggregating all the demand curves in town. The consequence of aggregation, as opposed to “integration,” is discrete as well. Also, we know that the demand curve exists with no regard to the supply condition and much less to the market price as the opportunity cost.