Demand is a function of price. The fact that you have desire for a product (demand when sell price=0) does not mean you have any demand left at the price it takes to make that product. So employment does create demand at prices higher than zero even though it doesn't change existing desires.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Firing Freeze
- Thread starter tradersboredom
- Start date
Below is a lesson in supply and demand.
"IN 1966, the price of eggs rose to a level that President Lyndon Johnson judged, God knows how, was too high. There were two culprits - supply and demand - and Johnson's agriculture secretary told him there was not much that could be done. LBJ, however, was a can-do fellow who directed the US surgeon general to dampen demand by warning the nation about the hazards of cholesterol in eggs."
http://www.nypost.com/seven/1229200...bj_the_egg_czar__other_govt_heroes_146265.htm
"IN 1966, the price of eggs rose to a level that President Lyndon Johnson judged, God knows how, was too high. There were two culprits - supply and demand - and Johnson's agriculture secretary told him there was not much that could be done. LBJ, however, was a can-do fellow who directed the US surgeon general to dampen demand by warning the nation about the hazards of cholesterol in eggs."
http://www.nypost.com/seven/1229200...bj_the_egg_czar__other_govt_heroes_146265.htm
Quote from BabyDrew:
Demand: If you can explain where this comes from, then you'll be a rich man. Demand just happens on its own based on whatever people happen to want at any given time. It doesn't have anything to do with whether or not people have the means to acquire this object...only that people want it.
Supply: Obviously, this is how much of any object is in the marketplace. Supply has nothing to do with the production and labor that prepares the commodity, just how much is in circulation.
Error in fiscal policy comes from the misconception that employment is the same as supply and consumerism is the same as demand. That is not true.
The best way to describe it is with a commodity that is not produced by human labor. Depending on your location in the world, fresh water will vary in price. Water in the Saudi Arabia costs more than water in Michigan. The demand for water is the same in both places (people need the same amount of water everywhere) but the supply of water in Michigan is virtually infinite whereas the supply of water in Saudi Arabia is almost non-existent.
The argument that employment increases demand is false. Demand exists because people always want more stuff. The demand for housing does not disappear when nobody has money....everybody still wants a house. That kind of thinking develops a ponzi economy where people build cars to make money to buy cars...the only way to sustain that economy is for more and more people to build and buy cars (kind of like the housing and credit bubbles).
Ok, let's move past the words s&d, as you're mainly talking about essential commodities and certainly these are going to be purchased above all else. People have to buy certain things, so they will go to extreme price levels to continue purchasing them.
But the US economy is not built on essential commodities. We are a nation of consumers. Consuming mostly what would be considered fairly frivolous stuff. Movies, cable tv, trading in cars every 2-3 years, eating out at restaurants several times each week, buying $100-200 pairs of jeans, iPods, etc.
If you don't have a job and run out of money/credit, the demand for these items goes out the window very quickly because they are not essential to survial. Soon the retail stores, restaurants, auto dealers start to lay people off, due to low demand.
Explain the drop in GDP. It was due to a drop in demand, which was created by destroyed wealth and the loss of jobs (as well as the fear of losing jobs).
By the way, I'm not saying the goverment should freeze firing obviously as I'm a free market advocate. But to think that demand will not fall due to rising unemployment is not logical to me.
Quote from BabyDrew:
The best way to describe it is with a commodity that is not produced by human labor. Depending on your location in the world, fresh water will vary in price. Water in the Saudi Arabia costs more than water in Michigan. The demand for water is the same in both places (people need the same amount of water everywhere) but the supply of water in Michigan is virtually infinite whereas the supply of water in Saudi Arabia is almost non-existent.
Also, your example of water and Michigan/Saudi Arabia is flawed. Demand for water is not the same in those places due to the scarcity and therefore price. Very few in SA would water their lawn to keep grass/hedges green, whereas in Michigan, this is done all summer long. The desire for water may be the same, but the demand (how much is actually purchased) is not. I would bet that the per capita water consumption in those two places is completelyd different.
Let's look at another example. Take food for example. We in the US are downright fat, because food (an essential commodity) is so cheap compared to wages. Look no further than Africa/Asia, where wages are much lower and you'll see that the demand is much lower for food. These people desire to eat as much as us, but are unable to pay for it, so many of them starve.
I'll grant you that desire for stuff, never changes, but demand certainly does, based on employemnt/wages.
tradersboredom
Guest
people who are 'working' are SUPPLYING or producing a service or good.
gov't provides essential services, schools, hosptals, policing, roads etc.
when the are working they are also demand.
GDP goes down if people are not PRODUCTIVE (working) idle human and industrial capital.
there is you supply and demand equation.
gov't provides essential services, schools, hosptals, policing, roads etc.
when the are working they are also demand.
GDP goes down if people are not PRODUCTIVE (working) idle human and industrial capital.
there is you supply and demand equation.
Quote from slider123456:
How can you have supply and demand if no one is earning money to buy things (demand) or working to produce things (supply)?
Quote from tradersboredom:
people who are 'working' are SUPPLYING or producing a service or good.
gov't provides essential services, schools, hosptals, policing, roads etc.
when the are working they are also demand.
GDP goes down if people are not PRODUCTIVE (working) idle human and industrial capital.
there is you supply and demand equation.
I was questioning the poster I quoted on the first page.
Also work does not mean demand I could work make a million a year and create as much demand as a bum on the street by living in a tent and growing my own food like a miser.:eek:
Quote from clacy:
Ok, let's move past the words s&d, as you're mainly talking about essential commodities and certainly these are going to be purchased above all else. People have to buy certain things, so they will go to extreme price levels to continue purchasing them.
But the US economy is not built on essential commodities. We are a nation of consumers. Consuming mostly what would be considered fairly frivolous stuff. Movies, cable tv, trading in cars every 2-3 years, eating out at restaurants several times each week, buying $100-200 pairs of jeans, iPods, etc.
If you don't have a job and run out of money/credit, the demand for these items goes out the window very quickly because they are not essential to survial. Soon the retail stores, restaurants, auto dealers start to lay people off, due to low demand.
Explain the drop in GDP. It was due to a drop in demand, which was created by destroyed wealth and the loss of jobs (as well as the fear of losing jobs).
By the way, I'm not saying the goverment should freeze firing obviously as I'm a free market advocate. But to think that demand will not fall due to rising unemployment is not logical to me.
I don't see any difference between essential and non-essential commodities. There is a point with ALL commodities that people will stop paying. Overcharge for food and water and you'll see gardens and wells popping out of the ground.
$100 jeans, cable TV, and other non-essentials have been in high demand since the birth of Hollywood and the Hollywood lifestyle. Ponzi economics created the possibility of ridiculous spending by not rewarding frugality and not punishing consumerism. The demand for the "high life" never came from employment; it was always there. The fact that consumers had to go into debt to keep the luxury industries afloat means nothing.
The so-called drop in GDP never happened...the GDP numbers were fraudulent to begin with. GDP was based on lots of "forgotten" liabilities and "marked to fantasy" assets.
Quote from BabyDrew:
I don't see any difference between essential and non-essential commodities. There is a point with ALL commodities that people will stop paying. Overcharge for food and water and you'll see gardens and wells popping out of the ground.
$100 jeans, cable TV, and other non-essentials have been in high demand since the birth of Hollywood and the Hollywood lifestyle. Ponzi economics created the possibility of ridiculous spending by not rewarding frugality and not punishing consumerism. The demand for the "high life" never came from employment; it was always there. The fact that consumers had to go into debt to keep the luxury industries afloat means nothing.
The so-called drop in GDP never happened...the GDP numbers were fraudulent to begin with. GDP was based on lots of "forgotten" liabilities and "marked to fantasy" assets.
You think almost 2,000,000 jobs lost since the beginning of 2008 will not lower GDP?
Quote from slider123456:
You think almost 2,000,000 jobs lost since the beginning of 2008 will not lower GDP?
I don't think 2,000,000 service based jobs contribute anything to GDP in the first place. Shuffling money around does nothing for GDP. Only productive jobs contribute to GDP...that's precisely the reason why government ditch digging does nothing.
Quote from BabyDrew:
I don't think 2,000,000 service based jobs contribute anything to GDP in the first place. Shuffling money around does nothing for GDP. Only productive jobs contribute to GDP...that's precisely the reason why government ditch digging does nothing.
I partially agree but to say the service based sector does not contribute anything to GDP is extreme. There are service sector jobs that contribute efficiency to the overall economy. Education, technological services such as internet, financial services which direct capital and many other service sector jobs create efficiencies in the economy.