*Opinion* What comes first, supply or demand?

There are a few very corrosive arguments in the realm of economics, but few are as corrosive as the idea that the supply of good and services *creates* demand for them. This is one of the core arguments for supply-side theory.

I have argued at length that I believe demand comes before supply. Just like the riddle of the chicken and the egg has an answer (eggs were around long before chickens) the riddle of demand-for and supply-of goods and services also have an answer.

Part of the confusion of this argument is the difference between specific and non-specific demand.

For example, if I live in a place where it is always cold and there isn't a warmer coat available in the markets I have access too, then there *is* a demand for a warmer coat. I don't know what form that will take in order to desire the utility of a warmer coat.

My desire for a warmer coat creates the demand and the incentive for people who make coats to try to make warmer coats.

Thus....

It is the demand for greater utility that warmer coats provide that is the incentive for coat producers to supply warmer coats, not the producers that supply warmer coats that create the demand for the greater utility that warmer coats provide.

Really let that sink in because that is, imo, the sentence that destroys any notion that supply creates demand.

Said more simply...

It is the demand for utility (or other desires) that goods and services provide, that creates the incentive for suppliers to create goods and services, not the suppliers that produce goods and services that create as yet unrealized utility that is the incentive to purchase goods and services.

But.....

What if no one realized that coats could be any warmer? In that case, might you be able to argue that it was the supply of warmer coats that created the demand for them?

NO! The creator of the coat is driven by the assumption that once he creates the warmer coat, people will buy it because they desire to be warmer. The coat creator isn't convincing people that they want to be warmer, the creator is simply showing them that can be if they purchase this new coat.

New products attempt to identifiy non-specific desires, that is, desires that aren't thought of in terms of something that exists

For example, GPS was something that few people realized was possible before it was made possible, but does anyone believe that GPS created the desire to get from one point to another easily and efficiently? No, of course not, the creators realized desires that already existed in ways that most people couldn't even imagine.

The genius of the entrepreneur is understanding the problems and desires of his prospective customer (even when they don't) and creating products and services that solve problems and provide entertainment and utility (at an affordable price!).

 

Well, many years ago, I was driving the car with my wife as passenger. She wanted me to take her somewhere. I can't remember why.

She was giving me directions.

As I drove down this road, she told me we were getting close to a turn, so I scanned harder than I was for possible turns. As we came up to this intersection, she told me to turn left. As I started looking for toward the turn and around for oncoming traffic, she said a little louder to turn left. I said, "okay", and started into the turn. She started shouting, "I said turn left"!

Well, like a ton of bricks, it hit me. I glanced over at her pointing at the passenger window.

If I had a map, I could have found the street easily and then using addresses on the buildings, or signage, could have found where she wanted to go.

Did I need GPS or a divorce?

bahahaha Guess which one I eventually got?

 

Advertising creates the demand. Desire for something better is natural.

 

Advertising convinces people to act on desires they had. Advertising a pill that promises to take away your headache doesn't create the desire not to have a headache. That desire already existed which is why the people that make Advil made Advil in the first place.

 

perhaps they are of the same magnitude of importance, like the product of two coefficients
One without the other doesn't translate into any meaningful economic change

 

Why not Anacin? lol Hey, I went with what you posted in the op. I'm not going to play if you won't play nice.

 

Demand is not an important variable to a good economist since it exists naturally and in abundance like air without need of economic intervention. People naturally demanded food clothing shelter long before supplies were readily available. We moved out of the stone age only when Republican supply siders invented or supplied things to meet very natural long standing demand.

Thus if we want to keep growing from the stone age we need to be Republican supply-siders.

 

You're missing the more insidious nature of the advertising: creation of demand (e.g. 'layer after layer of false needs')

 

What's odd is, I had what I needed as a kid. We had phones on cords, black and white television, radios, even records and movies. Food wasn't scarce. It wasn't loaded with hormones, or insecticides(other than a little DDT yikes). Seriously, it wasn't demand that forced us to need computers, we had pencils, paper, adding machines, and file cabinets. Our water wasn't polluted with birth control pill hormones, hormones from beef or the myriad of other medicines flushed down the commode. Our children weren't allergic to peanut butter, mostly.

So what caused the need for those? Was there ever need or was one created? By whom and for what causes were these needs created? I don't need to sit in front of a game. In fact, before computers and the internet which Al Gore created, we talked, face to face, even! It was amazing! lol

If you can figure out where the actual questions are, I'd be glad to read and contemplate your answers. Some of that was meant to be humorous.........if not sarcastically impish.

 

without advertising you'd have no economies of scale and things would cost 100 times what they do. Good the way you parrot communist lines!

 

I remember having to talk in front of family every time,fighting over which of 3 channels to watch, Dad telling me to get up and turn the volume up, and endless commercials.

 

If you weren't sitting there when dad was, someone else would have had to change the channel, turn up the volume or watch commercials. There are so many more commercials packed into an our of television programming today, it's dizzying.

And, talking in front of family? What could be so terrible? Embarrassment? Do what your told and stay the hell out of sight and out of mind when dad's in a bad mood. Read a book or play in your room. Go outside or in the basement. Cut the grass or shovel the snow. Do something out of eye and earshot and make it productive, and voila', fewer problems.

Well, that's what I found, though I did get into trouble. Whatever..........life today sucks.

 

This is basic abuse of Econ 101. Economies of scale has no reliance on advertising. Advertising, at least in the traditional sense, refers to monopolistic competition and therefore demand and not supply.

 

I record and skip commercials thanks to modern tech.

 

Just try to sell that new smart phone without it. Why the hell does anyone need that?

 

we would not build huge factories to turn out huge volumes of goods unless , with advertising, we could make huge numbers of people aware of the goods available to buy. It seems I"m always one step ahead of you.

 

Modern technology sucks. It's created subscriptions, and monthly fees, less news and more opinion, monthly cable bills and loss of homes and marriages through extremely easy access with a monthly internet service fee. Better? Nah......

 

flash light, camera, GPS, music, books,shopping, internet, etc etc calculator, calander, alarm clock etcetc

 

In China, Indonesia or some other third world country that offers plenty of work for a buck a day?

 

You show your ignorance of Econ 101. Economies of scale merely refers to average costs falling with output. Advertising can increase demand, but it isn't reliant on it. Certainly the reduction in costs isn't a reference to advertising (its supply side reference such as bulk buying). Do you know any Econ 101?

 

we are free to decide thanks to Republicans who support the free market. USSR never had one consumer product innovation.

 

I didn't need any of that crap and certainly not on a phone. It's all distraction whose need was created by those needing to find a way to make more money with shtuff we don't, nor ever needed. No way everyone needs that stuff. The need was created.

 

correct and without advertising huge output would not be demanded and prices would be sky high thanks to no economies of scale.

 

Unfortunately, this is patently false.

 

This is again ignorant. Economies of scale reflects nothing more than the nature of cost curves. It says, for example, a company will naturally become large in order to reduce costs. It has no bearing on advertising analysis (where you would have ignore orthodox theory of the firm and refer to the likes of Galbraith). You continue to tell me that you do not know Econ 101