 Well, good morning, everyone. In this session, I want to introduce you to the foundational concept that provides us an understanding of the working of the market economy. And Ludwig von Mises called this concept economic calculation. And the cornerstone of this foundation of economic calculation is the theory of market prices. And so that's what we're going to do in this session is talk mainly about market prices and how market prices form the basis for engaging in economic calculation. And then, in turn, economic calculation is what provides the possibility of a social economy, a market economy, a division of labor economy. So we'll proceed in four steps. The first step, I'll just talk about some of the basic principles of human action as a ground on which to proceed. And then we'll talk about what we call the personal economy. And this is the first part of our title, subjective value. We'll show how it is that you and I and every person formulate a personal economy on the basis of valuations we make. And then we'll move to the social economy. What happens when we want to integrate our personal economies? How do we do this in an effective way? And this is where we get to the principle of economic calculation and what, again, Ludwig von Mises calls appraisment. So we'll talk a little bit about those concepts. And then the fourth thing that we'll do is talk about the theory of price. We'll talk about the determination of market prices. OK, so you've probably heard already that we begin economic analysis with the concept of human action. Human action is just purposeful behavior. It just means that it's human behavior directed toward the attainment of an end. It's quite obvious, upon immediate reflection of this idea, that having an end in and of itself does not constitute action. We can have all sorts of ends that are unmet that we have not yet attained. That it's human beings because we're finite beings. We have to first identify and then acquire and then control the use of means in order to act to the attainment of our ends. If we were infinite beings, we could just attain our ends by willing them. So we have unmet ends at any moment in time. Or to say this in the more traditional way, the means available to us are scarce. And because the means available to us are scarce, we have to choose in action. We have to choose in two dimensions. One is whatever means we happen to possess, we have to choose which ends we'll pursue with those means. And for any given end that we select, we'll have a choice between different combinations of means to attain the given end. So we have the ends means framework of action and the way in which we perceive this as actors. So this is where we get to the principle of the personal economy. This is, again, what Ludwig von Mises likes to call economizing in action in these choices we economize. That is, we take given means and we choose to apply them to higher valued ends. And we set aside ends that we value as less highly. For a given end, we choose to arrange the means in a way that the combination is less valuable than alternative combinations of arrangements of means, which are more valuable. We economize. This is the mode of human action, we might say, or the logic of human action. Since we already mentioned, though, that when we value in this way, we're always choosing, we're always then comparing the value of one alternative to the value of another. And this is what in economic theory we call preference or preferring. And since we're talking about the real action of real human persons, when we talk about preference, we're talking about what Murray Rothbard liked to call demonstrated preference. We're not talking about the thought process of things that we like or don't like. We're talking about what we do in action, how we choose between the alternatives available to us in action. So our preferences, our valuations, in other words, are always demonstrated in action. They're coincident with action. There are two basic features then of value in this logical sense. One is the subjectivity of value. And by subjective, what we mean as economists is that value is nothing more than an intensive state of mind. Value exists only in our minds. It's a state of mind. It lacks an extensive property. There's nothing outside of our mind that is related to the value that we're assessing in our minds. It's a judgment that we make in our minds. This is the idea of subjectivity. Now, if this is correct, if value is subjective, without an extensive property, then we cannot measure value. Value is not a substance or something that exists objectively outside our minds that we can have a shared experience of and come up with a unit of value. We can't say I get 10 units of value from eating a chocolate ice cream cone. This is just like a nonsense statement. I mean, you could never make sense of this because we don't have a shared notion of what a unit of value might be. It's only in my mind. And then you can have value, of course, in your mind, but never the twain shall meet. We don't have an objective way of comparing value. Hopefully, you can see right away the truth of this proposition is what presents the problem of arranging an efficient or an economizing social economy. How are we supposed to do this when we can't actually know what other people value by our own experience? We can only experience our own personal assessments of things. Now, the other feature that I want to mention of subjectivity, which is sometimes confused with the principle subjectivity, is that value is not constant, or at least we cannot assume that it's constant. And by this, we mean in particular that there's no quantitatively constant relationship between external circumstances that surround our action and the subjective value that we place upon acting in these circumstances. There's no known quantitative relationship here. And hopefully, you can see that what follows from this, of course, is that we can't formalize economic laws in mathematical style, because there are no constants. Everything is a variable. And if there are no constants, well, OK, certain things we might see are related, but we can't have formal expressions of this relationship that are quantitatively definite. That is not a principle of subjectivity per se. That comes from the fact that we simply don't know what the connection is quantitatively between external circumstances, our judgments, and then the way we act, like the price of the product that's external to my mind and how much of the good I buy, because that action takes place through my mind. And there isn't any known quantitatively fixed relationship between the external circumstance, my mind, and then the consequence, my action, that's a consequence of this. All right, so let's move on to another, a final principle. And I want to do a little comparison here. And this is the idea that economists call imputation of value. So all we set up to this point is that we value in action the attainment of the end. But does this mean that the means that we use in action do not have value, or what's the association of the value of the means to the value of the end? And you'll see in the first line, the top line, is the Massessian view, the Austrian view, which holds to the logic that we've mentioned already. If human action is purposeful, if the point of human action is to attain the end, then the value of the end drives everything else in action, logically. The value of a consumer good is valued by a person only because it's an aid to the attainment of the end, whatever the end is. The value of producer goods are only assessed or valued by the person with respect to the aid that they give in producing the consumer good. So here we're not talking about some sort of philosophical notion of the value of things. We're not talking about the intrinsic value that God sees in the created order, or something like this. We're just talking about human beings engaged in action to attain ends. And here the logic must flow in this fashion. So this is a way, of course, that the price structure in the market will then flow. Now, the second line is the British classical way of thinking about the relationship between these things that culminates in Karl Marx and the labor theory of value. Value is intrinsic in the producer good. It's transmitted to the consumer good by production. Our minds are sent to this value somehow. It's consistent. We see it as consistent with the labor embedded in the good. Now, we're not going to go through a long demonstration of why this is false. I just want to point out that this can't be true if our discussion of the ends means relationship is true. This can't be true if human action is actually, the value of it is centered upon attaining the end. And it can't be the case that there's intrinsic value, values separate from that, from some other source, in the means themselves. And then the final line, the third line, is the neoclassical view from, say, Alfred Marshall. That the consumer good is valued as a mutually determined process by the independent value of the producer goods, the cost of production, and the demand for the good, the subjective value. But again, this cannot be true if our ends means discussion is correct. If our ends means discussion is correct, there can be no such thing in human action as independent value of means. The value of means must be as they are aids to the attainment of the end. The logic of it necessitates this top line, right? Okay, so now let's go to the next step. For our purposes in thinking about market prices, we wanna take one more step in valuation. So up to this point, we've just said, remember that, each one of us engages in human action. We organize our human actions as a system based upon the way that we value the various ends that we can attain with the various means that we have or that we can acquire through activity, right? Production or trade or whatever the case may be. But there are a few important laws of this valuation process that are useful in thinking about how we integrate once we start to integrate our personal economies. And so here's an illustration and you can see there are two separate sets of laws. On the left hand side, let's start there with the laws of utility or the laws of value. Utility is just another word for value in the context of economics. So here's a preference rank on the left hand side of equally serviceable units of a good. And the good that I picked is an iPhone SE. So the entry level iPhone. And if a person had just one iPhone SE, the person would allocate it to the most valuable purposes to which they put a smart phone, right? And so the value of that iPhone would be imputed to it according to the value the person placed upon doing those tasks, you know, attaining those consumptive ends. If a person though had two iPhones, a second iPhone, that second iPhone would have to have less imputed value than the first. Because the second iPhone would have to be applied to the person to a less valuable set of activities because the first iPhone is already available to him to accomplish the most valuable. And so on. And in fact, we can even see that it's possible that a person would have so many units of a given good that it would no longer be scarce to the person, right? And therefore they wouldn't value the iPhone at all. You imagine Tim Cook if he suddenly embezzled the 100 million iPhones that are in warehouses someplace and went off to Tahiti. I mean, what value would he place on losing one of them? Right? The answer is zero. So you can see again the logic of this structure. And hopefully you'll notice that this will apply to the law of demand when we get to the market. But, and then on the right hand column, I just got one other law, the law of the allocation of consumer goods. So we know that we don't act with just one consumer good, right? We don't have just a smartphone. Although sometimes I wonder about some people. We do other things. So how is it, is there a law? Is there a logical principle that we can apply to the understanding of how each person allocates their acts of consumption across different consumer goods they have? Is there something that's always in place logically there? And the answer here is that, as I've suggested, is that a person will allocate different tasks with different consumer goods so that there are no big value differences left after this is done. So in my example, this person uses the iPhone SE they have in order to FaceTime with their family. I know that that's what you're primarily doing with your phones, right? You're sitting in your dorm rooms back at your university and you're FaceTiming with your poor grandma who's eager to see your face and talk with you. Yeah, so you do this for two hours. Why is it two hours? Why isn't it four hours, right? Well, it isn't four hours because the marginal utility, the extra value of extending activity along this line would be a lower ranked, right? This means that other activity, which is higher ranked in marginal utility would then come into play. Let's say my example, this person goes for a run and takes an hour to do this. Why doesn't the person run for two hours? Well, okay, so you see the principle, right? So we're always allocating across different consumer goods in this way so that we don't see any big value differences that would allow us to shift out of the low valued activity into the high valued activity and gain overall. That's the logic of it. Okay, now let's think about producer goods or the laws of producer goods. Remember when we talked about imputation, we said value goes from the mind to the consumer good and from the consumer good to the producer good, right? The person's imputing along this logical line. So what about producer goods? Are there laws of the use of producer goods? And here, again, there is an important law on the left hand side, you see it, called the law of returns. So here my example is suppose this person who has the iPhone lives out in the country and through the property, he's got some land and through the property in the woods, there's a stream and in the stream he can go fishing. So it's a natural resource and they're fishing the stream and he's got all the consumer goods he needs to go fishing. He's got his pole and his line and his flies and whatever, whatever, he has waders to go into the stream and whatever. He's got all these complimentary factors of production, right? And then he goes into the stream with his labor and one unit of labor, let's say it's an hour of labor, he fishes and he gets four fish. But hopefully you can see right away that if he continued to do this, if he continued just to apply more and more of a variable input to a fixed input like the stream, he would fish out the stream, right? He would exhaust the physical capacity of the stream. And that's a general principle of all production. If we have a fixed complimentary factor of production and we add more and more of the variable factor to it to produce more and more, we'll eventually exhaust the finite productive capacity of the fixed factor, in this case, the stream. It could be a factory, it could be a farm, it could write anything. This is what we call the law of returns. So the law of returns is a necessary feature of human activity because again, we're finite beings, right? We live in a finite world. Okay, this has the same implication then as the law of utility that we talked about that diminishes as we engage in having extra units of a consumer good. It means that as we apply more and more of our effort to produce something, we get less and less valuable results. And therefore we switch to other productive activity because it becomes more valuable as we extend production in one line, right? Then the marginal value product, as we say, the MVP of doing something else becomes more valuable and so that's how we allocate across different productive acts by this logic, right, of thinking this way. So in my example, this person fishes one unit of fish, one hour or whatever the unit is, one hour of fishing gets the four fish, produces the consumer good, fries the fish, eats the fish, right, for dinner. Whatever is gonna mount some on the wall, whatever he's doing with the consumer good. And then instead of going fishing for another hour, he makes a doghouse. The doghouse takes him two hours, but he switches and he goes to the doghouse. Now, would he produce a second doghouse? Would he take another two hours in the day to produce another? No, he doesn't do that, why? Because the marginal value product of using his labor to produce a second doghouse is not worth very much. He only needs one, he's got one dog, he doesn't need two. So you see the logic of how this works. Okay. So just to sum up on the personal economy, if we look at any person, this is the way economists would analyze your behavior of mine, we look at any person, we conclude that their personal economy is integrated by them according to their perceptions and intellect, according to how they perceive the world and the possibilities of acquiring means and using them and so on. And then by the way that they value the attainment of various ends. So this is the way that we're acting. This is what gives structure and the possibility of economic analysis or any kind of analysis of human action is because we had these principles upon which all human action is based. Now let's turn to the social economy. In the social economy, as we suggested already, each one of us wants to integrate our personal economy with the personal economy of others. That's what the market economy is, right? The voluntary integration of our personal economies. This person doesn't want to produce his own fishing pole. Maybe he could do it, but it would take him weeks or whatever, it'd be inferior. He wants to go down to Agway. You have Agways down here? Agway's like a hardware store back in Pennsylvania where I'm from. And buy a fishing pole. He wants somebody else to produce his fishing pole, right? And he's just gonna buy it. He's integrating his personal economies, acquiring things now that other people have produced. Why does he do this? Why do you and I do this? Well, it's because of the greater productivity of the division of labor. Because I can buy a fishing pole for whatever, 50 bucks and I can teach at college and earn 50 bucks much more easily than I can produce my own fishing pole. And I'll get a better pole and so on. Right, you see the principle involved. So then the question becomes, can we as, is it possible to arrange an economizing social economy by valuation alone? And to think of the problem, there are two possibilities of whether this is possible. One would be we could appoint somebody, we could appoint a representative to make the choices for us. Somebody who's objective and independent, because if we try to do this personally, right, we're gonna be biased and we're gonna want things done. I'm gonna want the fishing pole for five cents or whatever, right? You know, whoever. We'll have this interest. So maybe we could appoint an unbiased person who would make the decisions for us. But hopefully you can see right away, we alluded to this before, right? The subjectivity of value does not permit this. There isn't any way that a third party can objectively compare the subjective value of someone who wants fish with someone who wants a doghouse with a given person's labor. It just can't be done, right? It's conceptually not possible to do. This isn't a information problem. This is what Mies has called a calculation problem, right? Well, so in any case, it simply cannot be done and we can't do this, we can't even do this by cutting out the representative and having direct democracy because we're in no better position to objectively compare the subjective value between different individuals than some third party, right? The problem can't be solved this way. And it's similar, of course, with the use of inputs or the use of means. If we're trying to, you know, who's gonna be the fisherman? Who's gonna be the baker? Who's gonna be, if we're gonna try to assign different tasks to different people, just on the basis of valuation, we can never do it in a way that's economizing. We can do it, right? It's easy to assign people and, you know, if you have the coercive power to force them into different jobs or whatever, or to give them monetary incentive to take a job, that's not the issue. Of course, you can do this, but it's not economizing. It doesn't, it's not human to do it this way because it isn't economizing. It isn't choosing the more valuable alternative over the lesser value because we can't know what these are, right? They're subjective, and so we can't know what they are. Now, as Ludaclan Mises famously showed us in his 1920 article on economic calculation in the socialist Commonwealth, the solution to this, of course, is a market economy. The solution to this is, if we have a market economy with private property, then we can engage in voluntary exchange in a monetary economy, and you'll learn more about the details of this today and tomorrow. Then we know who values things, consumer goods, let's say, relative to money more than others. Now we have a means for registering people's subjective value in a way that generates an objective evidence about one person's valuation relative to another. This guy goes to Agway, he buys the fishing pole for 50 bucks. Then we know he values the fishing pole subjectively more than he values the 50 bucks subjectively. I go into Agway, I see the fishing pole, I don't buy it. Well, then we know that the guy who buys it values it relative to money more than I do. And so that's the next step for us to take, right? Is to give an explanation now of money prices. Now, because I probably won't get through the whole discussion of money prices, I want to give you just an overview schematic. This is the logic of how it flows out, just in case we don't finish the whole thing. You can take this as a homework problem. So this is how our understanding of a market economy exists in the Austrian approach, an Assessing approach. So as we've said all along, we've got preferences of different persons. We've got this guy who wants the fishing pole and he goes to Agway and he's got preferences. And we've got the owner of Agway who has preferences as well. Preference, he's willing to obtain the $50 and sell the pole. And so we have a demand for the consumer good and supply of the consumer good. And that's the interplay between the two, which we'll talk about in a minute, is what determines the price of that fishing pole. It's $50, not $100, not $5. It's determined by the voluntary exchange activity of people expressing their preferences for things willingly in the market. Now once their price is a consumer goods, then two effects come from this. One is expenditure for consumers. So the guy who buys the fishing pole, he expends $50, right? He's making expenditures. But the other is the revenue for the entrepreneur. So the entrepreneur, Agway, earns the $50, his revenue. So every time there's an exchange of a consumer good, the seller gets the revenue, the buyer gets the good, right? The seller gets the money price, the buyer gets the good. So this revenue that's earned by Agway allows the entrepreneur at Agway to fund the purchase of producer goods. So that's the revenue stream that he needs to fund his expenditures to buy the inputs to, you know, he's just a retailer, but he's buying the pole, right, from a wholesaler and the wholesaler's buying inputs to produce the pole so on and so forth throughout the economy. So that's where we get demand for producer goods. The supply of producer goods just come from the workers and the other produce, it's just preferences, right? And again, we'll show this if we have sufficient time. So that's where we get the wages of the pole making workers, the, you know, the price of the fishing line and the component capital goods that go into making a fishing pole or whatever the product happens to be. The prices of the producer goods. And then the prices of producer goods generate two effects. One is the income for the seller of the producer good. So the worker who makes the fishing pole gets, the wage is not a cost, right? It's an income. It's a cost to the entrepreneur. And so on the left-hand side, we see the first principle of economic calculation. The entrepreneurs are going to try to generate production of goods where the revenue from the purchase, from the voluntary purchase of the buyers will more than cover the costs that the entrepreneur incurs in buying the producer goods, right? That's, that then would be economizing, right? Because the producer goods like this worker who helps to make the fishing pole, the wage is set by the general market for that kind of labor, which means that other entrepreneurs in other fields are also paying whatever the wage is, $25 an hour or whatever the wage is, to hire workers like this. And so if Agway or if the manufacturer of the pole is hiring this worker, what's being given up by other consumers is the value of the things that could have been produced if that worker would have stayed in a different industry. Why doesn't the worker stay in a different industry? Because the entrepreneur is paying a better wage or giving better working conditions or whatever more favorable job opportunity in fishing pole production. And so you can see how the economizing structure of the market is formed just by our own attempts to integrate as best we can our own personal economies. Okay, whoops, so let's go to the, let's go to the first part, sorry about that, let's go to this part, this top part and give an explanation of the prices of consumer goods. And if we have time, we'll do the producer goods. So let's start with this case. I'll switch my example a little bit and go back to the iPhone SE. And here, let's start with a simple case. And the simple case is, suppose we have an iPhone SE Gen 1 that was sold back in 2021. So it's used. So it's owned by just another guy or gal, right? It's not owned by Apple. And suppose we have this potential seller here on the right hand side who owns the used iPhone. And then we have somebody who comes in contact with this person who sees that the person has this phone and who's interested in buying it. So the buyer on the left hand side. And the parenthesis around the iPhone SE for the buyer means the buyer doesn't have it yet. The buyer's only sort of anticipating what it would be worth if he had it, right? The seller has the phone. And you can see by the numbers I've used here that a mutually advantageous trade is possible, right? Because the maximum that the buyer's willing to pay is $340 and the minimum the seller's willing to accept in trade is $300. So they can certainly form a mutually beneficial trade. Somewhere between the maximum price the buyer's willing to pay, the minimum price the seller's willing to accept. If that condition exists, then they can have a mutually advantageous trade, right? They can integrate their personal economies. The seller would rather have the money as opposed to the phone to do something else and the buyer would rather have the phone instead of the money. And so this is how they would integrate. It's not a logically difficult issue to notice that they can negotiate the price. Somewhere in between $340 and $300, they can higgle and haggle and come to a mutually agreeable price. I mean, they may not do this, but it's certainly logically possible that they could do this, right? And then if they can, then we've had a voluntary exchange at that price. And then of course, all we need to do in addition is add competition. We need to have, we have a market where there are lots of buyers potentially and lots of sellers. And then we find willingness then and ability to make trades within the group of people in the market. So that would be the next step. Now before we go to that step though, let's take an intermediate point, a side point which becomes important too. Because even my simple example, illustrates the fundamental principles involved in all market exchange. And so this is important to keep in mind. Doesn't matter what the exchange conditions happen to be. On the demand side, the preference of the buyers then always looks like this. The value of the good obtained is greater than the value of the money given up. If they buy the good. Now it could be of course that they're just looking and potentially buy it and they don't buy. But if they buy the good, then at that moment they value the good, the acquisition of the good more than the surrender of the money. And as far as the value of the money given up, there are two categorical possibilities, right? They could just keep the money for their own personal use, do something else with it, right? Or they could surrender the money to a more eager seller. Maybe our iPhone buyer negotiates a little bit with the seller that we mentioned and the seller holds out for $300. Well, maybe that puts in the mind to the buyer. Maybe I can whatever go on eBay or extend my circle of friends and find some other potential seller of the iPhone SE who would take it at a better price. So they may refuse to trade on the basis of that with any particular seller and seek out another one. And if so, then, well, they're giving up their money then to the most eager seller that they don't deal with. That would be their alternative. By the way, we call this, if we had a case where the, and we do lots of times, right? A case where the buyer holds out and doesn't trade. He doesn't give up the money. We call that reservation demand. But we'll see that term is sort of important in further discussions. And then supply is just the flip side, right? In every act of supply, no matter what the circumstances are, the seller is just engaged in valuation, is just saying there's the value of the money obtained which ranks above the value of keeping the good and the value of keeping the good could either have a personal use or it could be sold to another eager buyer, right? Those are the two categories. So again, Tim Cook has 100 million iPhones in warehouses all over the place. And he's perfectly happy to sell one of the iPhone SEs right now for $429. Do anybody who puts up the money? Because he has no reservation demand, right? He has no personal use for the 100 millionth iPhone. He just wants to, he wants to sell, he's produced it to sell it, not to use it personally. That doesn't mean he couldn't, right? That doesn't mean in the abstract, a person couldn't have reservation demand for the good and hold out, just keep the good and not sell it. Okay, so those are the general principles. It doesn't matter if it's Tim Cook or if it's this used iPhone that's just owned by Joe Smith or whatever. These are the general principles always involved. Now let's go back to the market analysis. So this is my example of the market clearing price. Suppose this is July 1st, 2000, excuse me, yeah, 2021. Suppose this was the market a year ago, roughly. What we know if we look at the empirical evidence about the market a year ago for used iPhone SEs is that data point, right? That's the only actual real empirical evidence that we have in markets. We have the price and the quantity traded. The supply and demand curve are just conceptual structures for economic analysis. There are no data points on the supply and demand curve. That's all just our concept of what would happen if the price were higher, what would happen if the price were lower. But the data point is always the argument is it's always at the intersection if you will at the market clearing point for the conditions of this market. And so our data point, my example, the data point is $300 price and 2,100 iPhone SEs used in July 1st, 2021 were bought and sold. I don't know what the actual data was, but something, right? But we could get the actual data and see what it is. Now the other point about this is what about, why is it that, what's the argument that there aren't data points up here on the demand and supply curve? Well, the argument is that if the actual price in the market is 300, if the price instead would have been 320, let's say, then there would be more sellers who would come into this market eager to sell. They're holding out again because they think the $300 price is unfavorable. They have reservation demand for their iPhone. But at $320 or $350 or $400 or $500, they come into the market and try to sell, right? At some higher price they'd be willing to sell. But on the demand side, as the price is hypothetically higher, the number of buyers would be reduced or certainly not increased, right? And so we wouldn't have a matching of buyers and sellers. We wouldn't have a full integration of the personal economies of people. We would have, as economists like to say, excess supply at prices above the actual price. We would have some sellers who can't find buyers and therefore they can't integrate, right? They can't get involved in a voluntary exchange. And if the price is too low, below the market clearing point, we would have excess demand. In other words, we would have lots of buyers but not enough sellers. And so we don't get full integration. So what's happening with the movement of prices, and we're talking just here about market prices, right? Not interfered with by state coercion and so on. The movement of market prices is that prices are moving to accommodate the integration as fully as possible of our personal economies. We get the best result in that sense, right? The fullest integration of our personal economies. To put this a different way around, given that there are a certain number of iPhone SE 2001, Gen 1 on July 1st, there are a certain number of them, 20 million or whatever that exists in the world. When people engage in trade, the good is moved from people who value it less with respect to money, into the hands of people who value it more with respect to money. The market is continuously moving goods away from people who value the goods less and into the hands of people who value the goods more. Again, relative to money, right? That's the accommodation that's occurring or one way to put it. Okay, now let's move to the case of new iPhones. So we haven't explained that case, right? We have only given you the general principles of how we would start the analysis. So let's suppose we go back again to July 1st, 2021 in order to think about Tim Cook and his entrepreneurial group who are anticipating the beginning of the selling of the 2022 model, the Gen 2 model, that started, I don't know exact dates, but started let's say on October 15th, 2021. And now they're selling this through October 15th this year, right? This is the Gen 2 iPhone SE. Okay, so how would Tim Cook think about this or how would any entrepreneur think about pricing the product? And the answer is if they don't have reservation demand, which is the way I've drawn this, just again for that particular case, if they don't have reservation demand for the good, they're gonna try to sell the good to fetch the best price possible, right? They're gonna sell it for what the market can bear. And so the way I see this particular circumstance of the iPhone SE, I'm just looking at their behavior. So they started selling it back in October and the price was 429. And as far as I know, the price has been 429 every day since then. Maybe they have a sale every once in a while, right? They do whatever, a Christmas sale or whatever. But they've decided in other words that $4.29 cents is the price. That's the price we're going to sell out. And then we're gonna accommodate people as they come day by day to buy at that price. So where did they get the 429 price? Well, they get it by, you know, if we diagram it this way, they get it by their assessment of the fact that they think that if they charge $429 over the production run of this iPhone, the one year, right? Selling run of this iPhone, that they'll get the best, most revenue possible. If they charged a price of $500, their revenue would be less. If they charge a price of $300, their revenue would be less. And then as I suggested, they can do different things, right? The entrepreneurs can do different things day to day. Once they decide, okay, the sort of price, we think that the overall market through the selling of this good is going to command a price of $429. They can do what Apple seems to be doing, which is we're gonna keep that price the same. No matter what, there may be days where you don't sell a single iPhone. Then other days where you sell $50,000, but we're gonna keep the price at $429. And how are we gonna accommodate the people who come to us and wanna buy iPhones? And we're gonna hold inventory. We're gonna produce the 20 million iPhones, and we're gonna put them in a warehouse. And then every time we get in order, we're gonna ship, right? That's how they do it. Or at least it seems that that's what they're doing. Now, they don't have to do it this way, right? They could just say, okay, we've got 20 million iPhones and we're gonna sell whatever, you know, say 50,000 each day. And if demand is shifting around day to day, we're gonna move the price so that the market clears. They could do that, right? They could let the price adjust. Or they could do some combination. The supply curve doesn't have to be vertical. It could be horizontal. It could be between the two, right? This is just an entrepreneurial strategy. But the point is they're always going to ask the price that they think will generate the revenue that they anticipate, right? Will generate the best revenue for them. So that's how the price gets to 429. Let me say one last thing. I won't go through the rest of the slides, but about the prices of producer goods. But I'll say one last thing. I put the revenue amount at the bottom, right? $429 per iPhone. They sell 20 million. That's just my made up number. I don't know how many they'll actually sell or plan to sell. But if that's the number, then it would be $8.58 a billion in revenue. And they'll earn that revenue over the year, right? Every day they'll sell some iPhones and that revenue will come in, and just like we explained already, they're earning that over the year. But they incurred the production costs earlier, right? In fact, they incurred the production costs, probably most of it, at least before the summer of 2021. They're incurring all the production costs first. And so notice when they're hiring workers and they're buying materials and they're amortizing the value of their facilities, the Foxconn facility in China and so on, the things that they own, right? When they're assessing the expense of all this, they're doing so only in anticipation of selling the iPhones to generate this revenue. And this is the entrepreneurial foresight dimension, right? That's expressed in the market, economy that you'll talk quite a bit more about today and tomorrow. So thank you very much for your kind attention. Thank you.