Economics Questions

Re: A Slice of the Market Process

dchernik — Thu, 29 Sep 2011 22:40:22 GMT

I was not sure whether the term "aggregate consumer demand" as used, perhaps, in macroeconomics, correctly described (6).

Re: A Slice of the Market Process

Autolykos — Thu, 29 Sep 2011 15:38:24 GMT

If you're not sure of the scenario you're presenting, why present it at all?

Jumping from particular consumer demand to aggregate consumer demand does not logically follow.

Re: A Slice of the Market Process

dchernik — Wed, 28 Sep 2011 17:46:37 GMT

I may mean aggregate consumer demand in (6), not sure exactly, though particular demand in (1)-(5).

Re: A Slice of the Market Process

dchernik — Wed, 28 Sep 2011 17:20:39 GMT

I do not mean aggregate demand, and this has nothing to do with Keynes. Saving is disequilibrating, lowering demand for the particular consumer goods that the saver would otherwise buy. Once Smith receives his profits, he spends the money on his own enjoyments. All I mean is that when the new capital goods are integrated into the economy, consumer spending will rise to the old value.

If consumer spending was $100, and Smith saved $20, then the production structure becomes longer, though its foundation shrinks. But once Smith's factory is humming along, consumer demand will be restored to $100.

Re: A Slice of the Market Process

Smiling Dave — Wed, 28 Sep 2011 16:59:14 GMT

One guy can restore consumer demand by taking a Green vacation? Demand for cheese?

Or do you mean aggregate consumer demand? In that case, as well, one guy by going on a green vacation can restore all the missing consumer demand?

Re: A Slice of the Market Process

dchernik — Wed, 28 Sep 2011 16:39:38 GMT

Smith restores consumer demand which diminished due to Smith's capitalist saving. Through such saving, production was redirected from consumer goods to capital goods. But savings, if invested profitably, increase the marginal productivity of labor. Hence, the restored consumer demand will be for a greater abundance of goods.

Re: A Slice of the Market Process

Smiling Dave — Wed, 28 Sep 2011 16:01:53 GMT

6. Seems a bit odd, "restoring the demand". The demand for what? Jones' cheese? How can one man on vacation restore so much demand lost that people were laid off etc, to a significant extent?

And if you mean aggregate demand, steps 3 and 4 also "restore demand", because Smith is buying.

Also, this whole focus on demand [if you mean aggy demand] smacks of Keynesianism. I'm sure you heard of Say's Law [the real one, not Keynes' misunderstanding of it].

Search my blog for aggy demand and says law, if you wish

Re: A Slice of the Market Process

Smiling Dave — Wed, 28 Sep 2011 15:58:40 GMT

6. Seems a bit odd, "restoring the demand". The demand for what? Jones' cheese? How can one man on vacation restore so much demand lost that people were laid off etc, to a significant extent?

And if you mean aggregate demand, steps 3 and 4 also "restore demand", because Smith is buying.

Also, this whole focus on demand smacks of Keynesianism. I'm sure you heard of Say's Law [the real one, not Keynes' misunderstanding of it].

A Slice of the Market Process

dchernik — Tue, 27 Sep 2011 23:59:04 GMT

Hey guys, I just want to make sure the following scenario looks reasonable.

1. Smith saves for the sake of investing, reducing demand for Jones' cheese.

2. As a result, Jones releases some of his factors.

3. These factors are picked by Armstrong, who uses them to make capital goods for Smith (who will buy them later when his saving is complete).

4. Having saved, Smith may lure other factors of production away from Brown's lawnmowers business.

5. Having created the product, he draws demand away from Robinson's lamps.

6. Smith spends the profits on a Green's vacation, restoring the demand.