Population explosion - or is it implosion?

[Shi Huangdi]

No, Che, you have it wrong. It's basic macroeconomic theory that aggregate supply is good(unless Adam Smith/Roland or one of those people want to correct me). When the Aggregate supply curve shifts to the left, meaning a decrease in productivity, we get stagflation. This happened during Jimmy Carter's administration when both unemployment and inflation went up. When the aggregate supply curve shifts to the right, inflation is pushed down and ouput is pushed up(along with a decrease in unemployment). Too much demand isn't good either, once it gets beyond it certain point it stops increasing economic welfare and merely causes inflation.

[Japher]

The Market for pharms that treat cystic fibrousis (spelling?) is really low. The company that makes the pharm does not make a profit on that product, yet still does, and compensates the cost to other products it makes.

I know this is worthless info. but it is a good though when thinking about supply and demand in regards to profit.

And supply is menaingless without demand.

and demand is meaningless without supply... You can't buy what they don't make, and you can't make what they aren't buying... at least not for long.

[Felch]

Originally posted by chegitz guevara
You act as if this has no other effect. The goods were already produced at a certain cost. In order to recoup that cost, the product has to be sold at a profit. Yes, elementary stuff. If, in order to sell the products, the company loses money, it has to cut costs elswhere. The bank still has to be paid. So the workers get cut.

Now if it was just one company, the effect would be small enough that the economy could practically ignore it. But in a general contraction of the market, it's many companies. And many companies laying off workers means there are a lot more workers whose demand just dropped, meaning supply is still too high.

But in the end it's still a simple case of a market correction. It's natural, and it happens all the time. It's not perfect, but it's not going to fail simply because the population declines.

[chequita guevara]

Originally posted by Felch X
Demand doesn't have to increase because it always outpaces production. People always want more than they can afford, and are always striving to get more.

But that's not demand. Wanting something isn't demand. You must have purchasing power in order to be considered demand. And purchasing power is limited.

[DuncanK]

Originally posted by Felch X
When supply outstips demand, prices fall. Prices will continue to fall until the demand and supply are equal. If the price is too low for the company to make a profit, then they won't produce as much.

Prices are sticky folks, especially wages. This is proven throughout history. Get with the times. Why do you think we intervene in the economy now days with monetary policy.

[Felch]

Purchasing power is limited by wealth. If wages rise (going way back in the discussion) because productivity rises, then the demand increases.

I'm sorry for misusing demand. I mean wanting something, and being able to eventually afford it. I represent demand for a giant plasma TV. I can't afford it right now, but that's not to say that I won't ever be able to. Since we're talking about the future and long-term economic forcasting I twisted the meaning of the word a bit.

[chequita guevara]

Well, my SO demands that I work on her website, so my supply of disucssion is going to diminish for now.

[Felch]

Prices are sticky folks, especially wages. This is proven throughout history. Get with the times. Why do you think we intervene in the economy now days with monetary policy.

Prices are as sticky as people want them to be. Capitalism is based (ideally) on mutual agreements for exchanges of goods or services. The prices can be renegotiated anytime, if one side feels unsatisfied.

[Felch]

Have a good day, Che. It was nice talking.

[DuncanK]

Originally posted by Shi Huangdi
No, Che, you have it wrong. It's basic macroeconomic theory that aggregate supply is good(unless Adam Smith/Roland or one of those people want to correct me). When the Aggregate supply curve shifts to the left, meaning a decrease in productivity, we get stagflation. This happened during Jimmy Carter's administration when both unemployment and inflation went up. When the aggregate supply curve shifts to the right, inflation is pushed down and ouput is pushed up(along with a decrease in unemployment). Too much demand isn't good either, once it gets beyond it certain point it stops increasing economic welfare and merely causes inflation.

Shi,

When AS increases prices must fall in order for the market to clear. Economist agree that prices don't ever fall enough for the market to clear. This is because of the stickyness of wages. Instead an increase in AD is needed to offset the increase in AS

[DuncanK]

Originally posted by Felch X

Prices are sticky folks, especially wages. This is proven throughout history. Get with the times. Why do you think we intervene in the economy now days with monetary policy.

Prices are as sticky as people want them to be. Capitalism is based (ideally) on mutual agreements for exchanges of goods or services. The prices can be renegotiated anytime, if one side feels unsatisfied.

No they can't. It's a matter if the price always falls to clear the market of not. In fact it doesn't unless there is an increase in demand to offset it.

[DuncanK]

Shi and Felch X,

Your theories are pre Great Depression.

[Dauphin]

Is there any evidence to suggest that a falling population leads to a decline in overall purchasing power?

[DuncanK]

Originally posted by Big Crunch
Is there any evidence to suggest that a falling population leads to a decline in overall purchasing power?

Population is considered a determinant of demand, just like income. When it increases demand increases and when it falls demand decreases.

[Felch]

Originally posted by DuncanK
Shi and Felch X,

Your theories are pre Great Depression.

You're right. Our theories date back to the 18th century. Your theories date back to the 19th century. It just so happens that our theories actually work, and capitalism continues to thrive, while communism has gone the way of the condor, existing only in isolated pockets.