Someone mentioned that production drove demand, and not the other way around recently, and I swallowed it without really thinking about it at the time, only to learn in later reading that it is not a foregone conclusion and is really one of the bigger debates in modern economic theory. I don't understand how one can conclude that production drives demand.
Supply-Side economics. Why?
- Thread starter CyJackX
- Start date
Pls be specific.
Production itself doesn't drive demand.
When people don't spend money and save as in Japan, production only will create deflation.
Production itself doesn't drive demand.
When people don't spend money and save as in Japan, production only will create deflation.
Baron
ET Founder
I think it's just a twisted way of saying, "If you build it, they will come."
But a more accurate description is this: "If you build lots of something that people really want, they will show up to buy it, but even with your best efforts, those buyers may want larger quantities than what you can't immediately supply."
The key is that you're making something that people really want to buy. So it's not that production is actually driving demand. It's that production comes out of nowhere trying to meet a demand that is largely unforeseen.
But a more accurate description is this: "If you build lots of something that people really want, they will show up to buy it, but even with your best efforts, those buyers may want larger quantities than what you can't immediately supply."
The key is that you're making something that people really want to buy. So it's not that production is actually driving demand. It's that production comes out of nowhere trying to meet a demand that is largely unforeseen.
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I think Baron is talking about something like NEW iphone
Just rehashing the apparently classic debate about whether consumption drives growth or production does.
I mean, if they have to want it first, that's the demand, not the production first.
Baron
ET Founder
Yeah, because you can't just produce lots of shit products and assume that people will actually buy them from now to infinity. And why is that? Because in most markets, potential buyers have choices. If your product sucks, there's a better one out there for buyers to purchase anyway. Remember the car called the Yugo? There's a reason it's not around any longer.
Here is a good link.. I'll have more in a min
https://wiki.mises.org/wiki/Supply-side_economics
https://wiki.mises.org/wiki/Supply-side_economics
Almost all transportation whether railroad or trucking send JIT(Just in Time) loads, what is ordered by large companies use to fit on full 53 foot trailer of same products of one company, but more and more companies are using LTL(less than truckload) as you will see trucks pulling two mini trailers that might have different brand names. Companies don't want to store excess cause they don't want to pay rent on trailers, and rather keep monies in their coffers. Walmart, other than Holiday season, has often has much less than well stocked shelving for couple reasons, less is better as they believe people will buy regardless as they have usually discount prices, but I think it is to hold down employee costs. Why have full shelves that have to be straightened each night if you have less goods. But where they have really gone downhill is fresh veggies and fruits, doesn't last long and looks horrible. Grocery has least profit margins but they draw you into shopping for other products. Target added grocery to some of their stores, don't know how they get anyone to buy as prices are not close to discount.
It is getting a bit like when USSR was around and government control, short supply of foods on shelves, and if you saw extra you took it if it was not a coupon item, long lines at bakeries didn't happen cause they had best bread, it was a coupon item and you couldn't hoard.
This is how supply controls demand, reduce the amount and people will get itchy of companies running out. LOL, those who live where it real icy, you go to the store and even though you have couple bags of salt at home, you buy the last bag on the shelve? As soon as you leave, guy in back brings out 2 bags, ROFLMAO.
It is getting a bit like when USSR was around and government control, short supply of foods on shelves, and if you saw extra you took it if it was not a coupon item, long lines at bakeries didn't happen cause they had best bread, it was a coupon item and you couldn't hoard.
This is how supply controls demand, reduce the amount and people will get itchy of companies running out. LOL, those who live where it real icy, you go to the store and even though you have couple bags of salt at home, you buy the last bag on the shelve? As soon as you leave, guy in back brings out 2 bags, ROFLMAO.
I haven't taken econ classes in a very long time.
The idea is premised on an economic equilibrium point between supply and demand. Increase the supply through lowering taxes or barriers to production, and the equilibrium point will be moved further out on the graph. The price will be lower so more people will be able to consume the item. More people will be working producing the item (full employment).
My Keynesian macro professor showed graphs on how the theory was bunk. Of course, I don't remember them. If anyone could provide supply and demand graphs on how the theory is valid, I would appreciate it.
The idea is premised on an economic equilibrium point between supply and demand. Increase the supply through lowering taxes or barriers to production, and the equilibrium point will be moved further out on the graph. The price will be lower so more people will be able to consume the item. More people will be working producing the item (full employment).
My Keynesian macro professor showed graphs on how the theory was bunk. Of course, I don't remember them. If anyone could provide supply and demand graphs on how the theory is valid, I would appreciate it.
Please you guys read this. Most popular economic theory is very wrong... https://mises.org/library/some-thoughts-supply-side-economics