Dejavu73 asked in Social ScienceEconomics · 1 decade ago

How does the information age, that we're living-in, affect the old economy theories of supply and demand?

I believe that on this information age the supply and demand theory of economy can no longer be accepted because information plays a tremendous role on how the supply and demand is controlled. Any thougths?

Update:

In response to : Bjorkmeister

In the old days when information was not as easy to obtain as today the market really flowed based on supply and demand but today it is fairly possible for a company or a goverment to control "artificially" the supply and demand. Oil is a good example of this. Opec, for example, decides when to increase or decrease production and in doing so affects the supply and this decision are not based necessary on demand they do it to control prices "artificially".

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  • 1 decade ago
    Favorite Answer

    The underlying laws of supply and demand aren't changed, but one of the assumptions underlying the functioning of free markets, that is, the assumption of perfect information, becomes closer to reality.

    But what did you mean by "how the supply and demand is controlled"? This concept of "control" of supply and demand runs contrary to the idea that total supply and demand emerge from the aggregate behavior of countless individual decisions, and is therefore not subject to control.

    But maybe you're getting at something else. What do you mean?

  • jehen
    Lv 7
    1 decade ago

    It simply makes the workings of supply and demand more efficient. In the past, forecasting supply and demand was pure art, as a result shortages and over-stocks were a routine cost of doing business. But the information age has dramatically smoothed out the process resulting in hugely more accurate forecasting.

    But, to your point, the information age introduces a new commodity - information itself. This is yet to be treated as such in my opinion. It seems the that few business models are based on the supply and demand of information. We look at it as a cost to be controlled rather than a critical resource that needs to be bought and paid for. Arbitragers know this and take full advantage.

  • 1 decade ago

    While the traditional market paradigm may have been altered by emerging technology, the rules of supply and dermand can never change. All that has changed are the means of delivery and manufacture, and as you point out the availability of information. I don't disagree this has far-reaching effects, but it cannot affect the underlying, critical drivers of all economic theory!

  • Allan
    Lv 6
    1 decade ago

    Information has always played an important role. Computers, cell phones, etc. just make it cheaper and easier to transmit information from one region to another. This makes international trade and capital flows cheaper and easier.

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