RE: Small business owner says consumption = job creation

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RE: Small business owner says consumption = job creation - 7/29/2011 12:08:36 PM

willbeurdaddy

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Joined: 4/8/2006
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quote:

ORIGINAL: Marc2b

It depends on how you define “demand” in this context. I was thinking that “demand” equals a need or want plus the ability to pay for it if available. A lack of ability to pay for it is a lack of demand in this context. I would really like to have the complete set of Battlestar Glactica DVDs but I can afford it right now. Hence, there is a want (it’s hardly a need ) but no demand… and thus no consumption in this particular case. Fortunately for Universal there are plenty of people who both want to watch BSG and can pay for it so there is enough consumption to make it worth their while to produce BSG DVDs.

You are essentially correct. Demand is a curve generally sloping from top left to lower right, with aggregate demand (units sellable) on the vertical access and price on the horizontal access. At each price there is an associated demand. A straight line across would mean that the same units would be sold regardless of price, a curve that drops to zero means that at some price there would be no market. The slope of the curve at any point determines shows the sensitivity of demand to price changes ("elasticity")

quote:

Which is exactly what I said. Demand creates the business/jobs in the first place; consumption keeps it going.

Demand and consumption are really the same thing in this context if I understand your point. Actually the relationship between demand and job creation changes at different points in the marketing cycle. Generally the jobs come first, as a product is conceived of, developed and marketed. The presence of the product (spurred by marketing efforts) creates the initial demand. Both because of the newness of the product and high cost demand is initially low. As R&D costs are recouped and prices can be pushed down demand grows, and as the product becomes more known demand also grows ("The Joneses have a TV, why dont we?) These effects feed on each other until the market matures. There can be jolts to demand from increased competition (2 companies marketing reaches more consumers than 1, and the expansion of demand can permit price cutting without profit cutting.

Once the market matures, you are correct, consumption (continued demand) determines whether jobs are created, lost or maintined.

quote:

Actually, history has shown (in both evolution and in business) that it is the generalists rather than the specialists who have the best chances for long term survival. If I make only pizzas and people suddenly start loosing an interest in pizza, then I am in trouble. If I also make subs and chicken wings my chances of survival are much better.

This is highly dependent on the product. The more technologically demanding the skills are the more specialization is a benefit (or necessity). Yes, changing demand for wings vs fried chicken means that KFC employees need to be able to make both. But a switch from nuclear power to solar requires a more demanding re-education to the specialty. The basic engineering skills that are common to both are too general to be of value absent the specialization.

_____________________________

Hear the lark
and harken
to the barking of the dogfox,
gone to ground.

(in reply to Marc2b)