Rational Economic Exchange - Main Video

Let's take a look at the resource market, with special attention drawn to the market for labor. For example, we buy a pizza have you ever thought what goes on in that transaction?

If you are the person delivering the pizza, you receive 1) The wages that your employer pays, and 2) you also receive some tips if you provide that extra special service.

Have you ever thought in detail about why this exchange takes place? That is, why you buy the pizza and why the owner of the pizzeria decided to produce the pizza and have somebody deliver it to you? The simple answer is; everyone values what is happening. They value what they're receiving more than what it is that they are sacrificing.

So you buy the pizza. Why? Because you value it more than what you give up— the money for the pizza, the money out of your pocket, or whatever it is that you could have purchased otherwise, or possibly saved. That is why you bought the pizza. The pizzeria delivered the pizza to you because the owner of the pizzeria valued the money that you spent, more than the value of the resources spent producing and delivering the pizza to you at your home.

But to produce goods and services, we need resources. And, who do we get those resources from? Guess who? You and me. We are willing to supply resources like labor, time, talents, entrepreneurial talents. Because in the end, we receive income for providing those resources to an employer. Payment made by businesses, in the form of wages, incomes, and benefits, translates into overall income for the person who's living in the household.

Consider the pizza person. The person delivered the pizza, at the end of the week, two weeks or a month, receives income. Income into the household that can be used for a variety of things— to consume, save, invest, pay taxes, or give to others. In summary, businesses like the pizzeria, here in the United States, Canada, Mexico and around the globe, generally produce those goods and services that we value more than what it is that we sacrifice.