Wednesday 30 December 2015

The chicken or the egg causality dilemma in economics

The chicken or the egg causality dilemma in economics is about demand or supply. Do we have demand first or supply? It is a complex question. However, we can have answers for some particular goods and markets. For example, weapons are developed and produced because the national defense ministry demands more advanced weapons to defend the country. Meanwhile, some products are supplied first, then people find their uses and demand for them. Penicillin is a good example. Penicillin was invented by accident; however, because of its antibiotics function, it is widely demanded by people. Overall, we can see that in most cases, demand comes before supply, but there are still some cases that supply comes before demand.

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