Thursday, 24 September 2015

The gains from trade... Chicken sandwich edition

Let's say you wanted to make a chicken sandwich, yourself, from scratch. I mean really from scratch - making your own bread, your own butter, your own cheese, growing your own salad, killing and cooking the chicken, etc. How long do you think it would take you? And how much do you think it would cost?

This guy has done it, and it only took six months and at the very reasonable cost of $1500:


Of course, we don't pay $1500 and wait six months for chicken sandwiches, and the fact that we don't have to nicely illustrates the gains from trade (between individuals and firms). I can teach students and get paid for that, and trade that money to someone else for a chicken sandwich. That person hasn't done all the work to prepare the sandwich themselves either. The sandwich seller trades some of my money with others who make the bread, make the butter, make the cheese, and so on. And so, instead of paying $1500 for a chicken sandwich, I can get one for easily less than $10. I could buy 150 chicken sandwiches for less than it would cost me to make one myself (not to mention all of the time savings as well). And all because of trade between individuals and firms.

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