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Because you can't measure what people don't want, or what their relative preferences are between comparable items. You really can't do this right without a pric

Because you can't measure what people don't want, or what their relative preferences are between comparable items. You really can't do this right without a price system. UPDATE: And this applies not just at the consumer level, but in the decisions firms make regarding their supply chains.

ue_ 10y ago
>Because you can't measure what people don't want, or what their relative preferences are between comparable items. In what way do prices help with that? If more Fuji apples are requested, you know people like that over the other varieties. If you want one brand of apples over the other, one brand's products_distributed variable increases by one. Sorry if it appears as though I'm being obtuse. >And this applies not just at the consumer level, but in the decisions firms make regarding their supply chains. Howso?
- Lazare 10y ago
  Different varieties of apple have different production costs, and those costs change over time, sometimes rapidly an unexpectedly. Maybe I prefer Fuji apples, but only slightly; I'd be perfectly okay with a Nashi pear too, or if there's a shortage of Fuji apples, a Royal Gala. Maybe a frost has reduced Fuji apple production; it would make sense for Fuji apples to be allocated first to the people who really prefer them, and then if any are left over they could come to people like me. > If you want one brand of apples over the other, one brand's products_distributed variable increases by one. Right, so how do you capture my "sure, a Fuji apple, but only if there's plenty"? In a price system, it's easy: The price of Fuji apples fluctuates based on supply and demand, and I'll purchase the fruit based both on my internal, ever-changing preferences and the price. Regardless of the changing relative scarcity of Fuji apples, I will, apparently magically, end up with the fruit that more efficiently matches my wants and needs with the global fruit supply. And this works even if you scale it up to 7 billion people and millions of products. That's a very difficult trick to match! (And keep in mind, we also need to make decisions about distribution, stock levels, what apple types to grow, how much land to allocate to orchards, how much fertilizer to use, where to locate orchards to maximise growing season but minimise fuel usage for transportation. Every resource we have is limited in some fashion, often sharply so, yet our wants and needs are effectively boundless.)

ue_ 10y ago

>Because you can't measure what people don't want, or what their relative preferences are between comparable items. In what way do prices help with that? If more Fuji apples are requested, you know people like that over the other varieties. If you want one brand of apples over the other, one brand's products_distributed variable increases by one. Sorry if it appears as though I'm being obtuse. >And this applies not just at the consumer level, but in the decisions firms make regarding their supply chains. Howso?

Lazare 10y ago
Different varieties of apple have different production costs, and those costs change over time, sometimes rapidly an unexpectedly. Maybe I prefer Fuji apples, but only slightly; I'd be perfectly okay with a Nashi pear too, or if there's a shortage of Fuji apples, a Royal Gala. Maybe a frost has reduced Fuji apple production; it would make sense for Fuji apples to be allocated first to the people who really prefer them, and then if any are left over they could come to people like me. > If you want one brand of apples over the other, one brand's products_distributed variable increases by one. Right, so how do you capture my "sure, a Fuji apple, but only if there's plenty"? In a price system, it's easy: The price of Fuji apples fluctuates based on supply and demand, and I'll purchase the fruit based both on my internal, ever-changing preferences and the price. Regardless of the changing relative scarcity of Fuji apples, I will, apparently magically, end up with the fruit that more efficiently matches my wants and needs with the global fruit supply. And this works even if you scale it up to 7 billion people and millions of products. That's a very difficult trick to match! (And keep in mind, we also need to make decisions about distribution, stock levels, what apple types to grow, how much land to allocate to orchards, how much fertilizer to use, where to locate orchards to maximise growing season but minimise fuel usage for transportation. Every resource we have is limited in some fashion, often sharply so, yet our wants and needs are effectively boundless.)