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You mean because with cheaper widgets, demand would increase and so monetary value of finished goods and would rise and so GDP as well? Wouldn't GDP actually d
by dwiel 7y ago
You mean because with cheaper widgets, demand would increase and so monetary value of finished goods and would rise and so GDP as well?
Wouldn't GDP actually decrease if the same number of widgets are made, but now for cheaper and so through competition have less "value"?
- vlovich123 7y agoWhat if halving the price now makes it possible to start producing a new product not economically feasible before? Hell the phone you use is only possible because of continued minituarization and cost cutting of previous generations’ computers.
- logicchains 7y ago>Wouldn't GDP actually decrease if the same number of widgets are made, but now for cheaper and so through competition have less "value"? Cheaper doesn't mean less "value". If we have inflation, prices go up but value doesn't increase, and if deflation decreases prices, that doesn't mean a decrease in value. GDP calculations try to account for this, to capture the fact that e.g. a $500 phone today contains a lot more "value" than a $500 phone from 1995. GDP would hence (ideally) account for the change in value-per-dollar. It would also include whatever new output was made possible by there being more resources left over now due to less being spent to fulfill people's widget needs (i.e. the money now not being spent on widgets will instead be invested or spent on something else).
- dwiel 7y agoThanks for answering my honest questions. I didn't realize GDP accounts for perceived value. I had assumed it was restricted to the economic value strictly defined by the dollar. Thanks.
- logicchains 7y agoNo worries! And sorry to see you were downvoted for asking an honest question, for the record I didn't downvote you.