Employment and Unemployment

In the teaching of how an economy works, a key role is played by the abstraction of a ‘market’. Another word for an abstraction is a model. A model of a market is written in terms of the demand for a particular good, the supply of the good, and a price that clears the market — the price that results in the number of items that people want to buy at that price equal to the number of items that people want to sell at that price. As an example, think about snow shovels in winter, which are stocked by stores waiting to sell them and are sought by households. The abstraction, the model, is only approximate — not every shovel that is stocked will be sold and not every family looking for a shovel will find one quickly. And the model does not address the more complex question of who buys from which store. Nevertheless, the model captures the idea that, for many goods, most of the time, sales do roughly match both what is stocked and what is sought for purchase, despite a total absence of any central planning. Some markets, like the seasonal clothing market, for instance, work rather differently as only some items are sold during the prime season, some are sold at reduced prices afterwards, and, as fashions change, some items are not sold at all.