[SOUND] Welcome to the third weeks of microeconomic principles. We are talking to you from the University of Illinois in Urbana–Champaign. And in fact, we're on Green Street at Champagne, Illinois. And this is the main drag, where students buy food and retail things. And we decided this is a really great place to introduce our week this week. Where we're going to be talking about, are markets the best was to distribute resources in society? Are free markets the best way. And we'll use the model of supply and demand that we introduced last week to answer that question. But we think, I mean, since there's so many buyers and sellers here, in this main drag here, there's so many stores, why don't we start this week by asking people, how happy they feel after they buy the products. So, let's hear what they have to say and let's comeback here afterwards. So what brought here as of this afternoon? >> To get a new computer for school. >> What made you buy that one instead of other ones? >> Honestly, my dad said that if I got good grades at school that I can get a new computer. But if I got all As, I get to choose which computer so. >> Oh, okay. >> I chose this one. Well, the have a student discount here. And then they had an extra discount of fifty dollars for the winter, so, it would be a good time to buy it, I guess. I think it's a pretty good price for this one. >> I bought a new TV set, this is the first one, I think I've ever bought. I've usually inherited them from other people that just [SOUND] had one to give away. Well, I looked around online first to find something that had the connections that I wanted and the right resolution and refresh rate, that sort of thing. And then, went to the electronic store. And the TV that I liked on paper, just the picture didn't look good in the store when I was watching a basketball game there. And so, I started shopping again there, but I was pretty well armed with what was out there. I like when stores have their inventory online, so I can check to know whether the product that I need is even at the store. Yeah, I got a great deal, because the one that I bought was on closeout. So, it was basically, they were selling them until they were done with them. And the set that I liked, I asked the salesman whether they had any in the back, and it turned out they didn't. So, I offered to buy the display model for 20% off, and they made the deal, so I got a really nice price for it. >> So, you heard what they have to say. How happy they are when they buy their products. It's really simple for us to think how happy people are when they're buying useful things like computers, or food, or things of that sort. But it's a little more difficult to understand, people are happier after they buy really silly things that you find out there. So if we are going to ask the question, are markets the best way to distribute resources? We have to start with those things out there that people spend money on and we think they have no use whatsoever. For instance, here's an example. People buy this little ice cream cone, and what it is does is that it rotates around. And if you want to eat your ice cream and you don't really want to tilt your head, the only thing you have to use is stick your tongue and the electric thing rotates the ice cream cone for you. So it's a really useful thing and it's about $20 on eBay. Here's another one. These are all things I've found on eBay at some point or the other. If someone was selling the gum, the chewing gum, that Britney Spears was chewing at some point. Apparently, she was chewing the gum, she threw it out. And someone picked it up and put it on eBay for sale. And it started about $10. When it sold, it sold for about $500. So people bought Britney Spears' gum for $500. So, probably the most stupid and ridiculous thing that came out in the last years is this little thing here. It's a product that is basically a blanket with sleeves and they sell it in a many drugstores and so, you can buy it online and many different brands. But, that's all there is right, it's a blanket with sleeve where people pay $30, $40 for this thing. Amazingly. So you have to ask yourself why do people spend money on these things? Are we better off doing something else? Could they have better off given that money to charity or doing something else with it? Now that's one of the questions that we're going to study this week. But to continue with the same idea of people buying things that are traditionally not we don't think about people selling their market. Here's one that eBay had about seven years ago. So, this person actually was put an eBay auction, this person was selling one of his kidneys. And when the bids started on Friday, it started at $25,000. eBay took notice of it and they took it down because, as you may know, it's illegal in the US to sell your organs for money. But when the eBay took the bidding down on Monday, that was three days after it started, the bidding was going at $4.5 million. So someone out there was willing to pay $4.5 million for a kidney. So as the application this week, when we ask the question are markets the best way to distribute resources? And what happens when the markets are not free to distribute resources? We are going to talk about the issue of organs and particularly the shortage that we have. In many countries but particularly in the country of the US. The issue of organ donation in this country and in every country but with the one I saw in this country, it's a real critical one. Right now, I checked the organ procurement network which is an institution that maintains the list of people that need an organ. So when you need an organ, when determined by your doctor that you need an organ, you're put in this list. And this is an institution that maintains that list. I checked this morning and there's about 120,000 patients waiting for an organ, but only about 10,000 organ donors. So you have almost 100,000, a shortage of 100,000. These are people who need an organ and cannot get it. They need an organ in order to live, to survive, and they don't have anyone to give it to them. In fact, the average time for a kidney. The average time a person has to wait for a kidney. After you go to a doctor and he said that what you need in order to survive is a kidney. And you go into this list. The average time you have to wait is three and a half years. So obviously, by the time most people get the kidney it's actually too late. As an example of this, consider the story that appeared in the Boston Globe some years ago. So there was this mother who's son needed a kidney in order to survive, and she could not donate it to her. She would be gladly donated her kidney for her son. Anyone of us would do it. But she could not do it because her kidney was not compatible with her son. So her son will have to go to the list and wait some years in order to get a kidney. She really wanted her son to get kidney so what she did, or the idea she proposed to the doctor is, why don't I donate my kidney to anyone else. The first person who's compatible with me on the list, and in return you will put my son at the top of the list. So when you think about it, most of us won't have any problem with that trade, it's a trade like any others. You're buying a computer, you give some money, you got a computer back. She was giving her kidney in exchange for putting her son at the top of the list. Most of us won't have any problem with that particular transaction. But yet what about if she was actually willing to give off her kidney to get some money and use that money to pay for her son's school. That's a different transaction. There's nothing inherently different in that transaction, but the ethics are a little bit different. What about if I donate my kidney and in exchange I just buy a new car? Also, it's similar, there's nothing different about the transaction, the trade. Both people are willing to do the trade. They're winning from it, but the ethics are different. So these are the questions we're going to try to tackle in this week. Part of it we'll do it in these lectures and part of it I'm going to give you a chance to say a little bit about that in the discussions. So we'll use the model of supply and demand to start it off. And then we go from there. >> Produced by OCE Atlas Digital Media at the University of Illinois Urbana-Champaign.
