Posted from a friend's message board (SDN): "So I'm taking an econ class right now about the U.S. healthcare system, and my professor said something the other day which I've decided doesn't sit well with me at all. We were discussing the differences between the classical market model and the healthcare market, and she claimed that it is only in healthcare that the seller can create a demand for something that previously did not exist. Apparently, in a classical market things are only sold when there is a demand for them. Now, I've said before that my understanding of economics is weak, but this seems utterly counterintuitive. It seems to me that part and parcel of the capitalist economy and the entrepreneurial spirit is creating niches and selling things to people that they never thought they needed. Isn't this what advertising is all about, anyway? Here are some examples of non-healthcare products which I think are precisely a result of induced demand: video games life insurance amazon.com (and the phenomenon of the online superstore) Anyway, I'd be interested to here people's thoughts on the notion of induced demand in the marketplace. Does it exist or doesn't it?
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9/26/04 at 5:41pm