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The Price System

Format: DVD | Streaming | Download
Length: 12:00
Grade Level: 6-10 | Price: $ 10.00
Closed Captioned:

Streaming/DVD: English

What's the right price for a product? How do sellers know?

In Part I, two high school students are researching their homework online when they come across a lecture on free market economy given by Nobel Prize winner Milton Friedman. Friedman uses "I, Pencil," a short story by Leonard Read, to explain how a free-market economy operates, stating there is nobody in the world who knows how to make a pencil. He explains that thousands of people worldwide manufacture the various components of a pencil. For example, the wood comes from United States, the graphite from South America, rubber from Malaysia, etc. And even though these people do not speak the same language and have very different backgrounds, they are able to cooperate peacefully to produce a pencil. The transaction is voluntary, has no central control and all parties involved are able to benefit.

Part II focuses on the mechanism that makes a free-market economy so successful: The Price System. Milton explores how The Price System has enabled the United States to develop. For example, producers use it to note a change in demand of product by taking cues from price fluctuations. The higher profit margins serve as an incentive to produce more and indicate which mode of distribution to use for the product. Because of this, people around the world "some who may have never even seen or used a pencil" know to produce more of the component of the pencil in which they specialize. Milton concludes that in this way, millions of people are able to cooperate peacefully on a daily basis.

Subject Areas

Business / Family & Consumer Science



Invisible Hand


Supply and Demand

Great video. Perfect for explaining the market system.

Bart Goldman
Calabasas, CA

This explains how and why the free market works, without a lot of technical jargon. We have been remiss in teaching the value of free market economics to a nation that was founded on these principles. We will surely lose our economic advantage if we no longer value our free market system. We need more materials like this.

Janice Silvis
Ford City, PA

Excellent video! My students found it understandable and interesting. Used it in conjuction with a discussion of Free Market Economy and Mercantilism.

Richard Cusson
Buda, TX

I have used this video for several years now and still think it is very effective in communicating several basic economic concepts. With so many politicians claiming that the U.S. should be energy-independent, this video shows that we cannot even be pencil-independent!

David Truhett
Tuscaloosa, AL

My kids were thrilled that the video was on their level of learning and enjoyed it. Our classroom discussion was on a higher level than with any other video.

Daphne Brown
Shreveport, LA

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