5 ms·

>> If you increase the supply of fast food you increase competition which lowers prices That presupposes that restaurateur was making fat profits. If he isn't,

>> If you increase the supply of fast food you increase competition which lowers prices That presupposes that restaurateur was making fat profits. If he isn't, then increasing supply in the absence of higher demand will only result in the restaurant going out of business. But increasing demand will grow the economy even when the restaurateur is making thin profits.

jules 9y ago
By the same logic, changing demand presupposes an inefficient market. Changing demand in the absence of higher supply will only result in demand not being met.
- petilon 9y ago
  Going back to the fast food example, if there is higher demand the restaurateur can get bank loans to hire more employees and produce more Big Macs. Entrepreneurs are always looking for demand and then fulfilling that demand in order to generate profit and wealth. The reverse is not true. Consumers aren't going to be interested in your mud-pies just because you increased the supply of mud-pies.
  - jules 9y ago
    If there is higher supply of a good then the price goes down and the amount of the good sold goes up. This is entirely symmetric to higher demand leading to higher prices which results in more supply. People will not buy mud pies unless the price is so outrageously low that they can use the mud for their garden. The opposite equivalent of a mud pie is a product that nobody will produce except at an outrageously high price.
  - imtringued 9y ago
    More supply means lower prices and with the saved money you can buy something else.
stale2002 9y ago
"increasing demand" doesn't even make sense, is the problem. The world already has infinite demand. As in people already want to own an infinite amount of things. I would love to own a thousand mansions. If someone were to mind control me and make it so that I doubly want more mansions, that doesn't effect at all whether those mansions exist. People "wanting" things doesn't make them exist, because society already wants an infinite amount of things! Suppy is the act of creating things of value. Demand is just the method of DISTRIBUTING those things of value. But at the end of the day, what matters is creation. Your restraunt example doesn't work, because imagine if I had a magic machine that could instantly create hamburgers for free. I could easily find people in the world who currently "demand" this food, for me to give it away to. THAT is what it means to "increase supply". Creating things more efficiently for less resources is the exact same thing as having a magic machine that creates things for free. Or in other words, if you haven't created more things using less resources, then you haven't actually increased supply. Demand is just the method of distributing those finite amount of goods.
- fyi1183 9y ago
  What people usually mean by demand in this context is effective demand, which means people offering money in exchange for goods. That can be increased quite easily, and it makes perfect sense, because people/businesses will produce more goods (which is the definition of increased supply) to chase the offered money. Your musings about infinite demand and magic production technologies are not entirely uninteresting, but they miss a huge universe of much more interesting and immediately applicable ideas.

jules 9y ago

By the same logic, changing demand presupposes an inefficient market. Changing demand in the absence of higher supply will only result in demand not being met.

petilon 9y ago
Going back to the fast food example, if there is higher demand the restaurateur can get bank loans to hire more employees and produce more Big Macs. Entrepreneurs are always looking for demand and then fulfilling that demand in order to generate profit and wealth. The reverse is not true. Consumers aren't going to be interested in your mud-pies just because you increased the supply of mud-pies.
- jules 9y ago
  If there is higher supply of a good then the price goes down and the amount of the good sold goes up. This is entirely symmetric to higher demand leading to higher prices which results in more supply. People will not buy mud pies unless the price is so outrageously low that they can use the mud for their garden. The opposite equivalent of a mud pie is a product that nobody will produce except at an outrageously high price.
- imtringued 9y ago
  More supply means lower prices and with the saved money you can buy something else.

stale2002 9y ago

"increasing demand" doesn't even make sense, is the problem. The world already has infinite demand. As in people already want to own an infinite amount of things. I would love to own a thousand mansions. If someone were to mind control me and make it so that I doubly want more mansions, that doesn't effect at all whether those mansions exist. People "wanting" things doesn't make them exist, because society already wants an infinite amount of things! Suppy is the act of creating things of value. Demand is just the method of DISTRIBUTING those things of value. But at the end of the day, what matters is creation. Your restraunt example doesn't work, because imagine if I had a magic machine that could instantly create hamburgers for free. I could easily find people in the world who currently "demand" this food, for me to give it away to. THAT is what it means to "increase supply". Creating things more efficiently for less resources is the exact same thing as having a magic machine that creates things for free. Or in other words, if you haven't created more things using less resources, then you haven't actually increased supply. Demand is just the method of distributing those finite amount of goods.

fyi1183 9y ago
What people usually mean by demand in this context is effective demand, which means people offering money in exchange for goods. That can be increased quite easily, and it makes perfect sense, because people/businesses will produce more goods (which is the definition of increased supply) to chase the offered money. Your musings about infinite demand and magic production technologies are not entirely uninteresting, but they miss a huge universe of much more interesting and immediately applicable ideas.