Problem 8
The view presented by the economist may be considered as being accurate to some extent but may also be viewed from the perspective of the flaws that it projects, which are essential to note in trying to understand the concept of demand and supply. The first major flaw from the view is to assume that the economy is consumer driven as a result of the fact that producers tend to focus on what is consumed. Skousen (2013) argues that the economy is driven by both consumption and production all of which are essential towards building a proactive understanding on what it means to build up an economic structure. In this case, it can be argued that the production process is driven by consumption while it can also be argued that the production process also acts as a vital determinant of the economy.
The second notable flaw in the logic presented is the assumption that the only aspect that production companies ought to focus on is the stimulation of consumption as a way of promoting production. This is a wrong statement because although consumption may act as a stimulant for production, it does not act as the only determinant. Elms, Hassani, & Low (2017) point out the fact that consumption acts as one of the determinants of production considering that the production process will also seek to define whether indeed consumers will move towards a given product attributed to the aspects of quality among others. From that perspective, it can be argued that economist’s logic fails to highlight the whole expectation in trying to improve production, as it indicates that consumption is the only determinant.
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Lastly, the logic presents a significant flow, as it projects the fact that consumption is the end purpose of all production failing to recognize the fact that consumption and production is a continuous process. The logic creates the understanding that the last approach is defining consumption, which would act as a critical determinant of whether the demand would increase. However, this is not an accurate assumption considering that consumption is only a step in defining both demand and supply. After consumption, the companies involved in the production process are then expected to reflect on issues or queries that may have been presented by consumers. These issues include aspects of quality or some of the key improvements that the production companies ought to make in the products that they deliver. Thus, this means that the information that the companies can gather would seek to change the production processes as a way of building that proactive platform for positive outcomes.
On the question of which the government should promote first, it is clear that the government ought to focus on consumption as the first step towards building production. By focusing on consumption, one of the critical expectations is that the government would focus much attention on increasing demand. When the levels of demand increase, supply would also be expected to increase to match such expectations, as these two elements move hand-in-hand. That would mean that the level of production would increase significantly as production companies seek to focus much of their attention on the delivery of products matching the demands. Ultimately, this would mean that the government would have created an economic structure that is self-sustainable considering that it drives both demand and supply.
References
Elms, D. K., Hassani, A., & Low, P. (Eds.). (2017). The Intangible Economy: How Services Shape Global Production and Consumption . London, UK: Cambridge University Press.
Skousen, M. (2013). Economic Logic, Fourth Edition. New York, NY: Regnery Publishing.
