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FIXED INPUT: An input in the production of goods and services that does not change in the short run. A fixed input should be compared with a variable input, an input that DOES change in the short run. Fixed and variable inputs are most important for the analysis of short-run production by a firm. The best example of a fixed input is the factory, building, equipment, or other capital used in production. The comparable example of a variable input would then be the labor or workers who work in the factory or operate the equipment. In the short run (such as a day or so) a firm can vary the quantity of labor, but the quantity of capital is fixed.

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CONSUMER SOVEREIGNTY:

The notion that consumers ultimately determine what goods and services are produced and how the economy's limited resources are used based on the purchases they make. Consumers thus reign over the economy as sovereign rulers.
Like most notions this one captures an essential dimension of economic behavior, but it also has a notable qualification.

Consumers are King

Consumer sovereignty means that buyers ultimately determine which goods and services remain in production. While businesses can produce and attempt to sell whatever goods they choose, if the goods fail to satisfy the wants and needs, consumers decide not to buy. If the consumers do not buy, the businesses do not sell and the goods are not produced.

Suppose, for example, that Manny Mustard's House of Sandwich introduces a new menu item--a sandwich made with fried squash, sweet pickle relish, blue cheese dressing, sliced cabbage, and pumpernickel bread. Manny, the proprietor of this establishment, thoroughly enjoys this sandwich and thinks his patrons will as well. If they do, then business increases, profits are higher, overdue business loans can be paid off, and he can finally send his unruly step-son away to military school.

Manny's business success, however, depends on his patrons. Will they like his new fried squash, sweet pickle relish, blue cheese dressing, sliced cabbage, pumpernickel bread sandwich? If they do not, then his step-son will continue his unruly behavior. The consumers are king! They ultimately decide Manny's business fate.

Consumers as Pawns

Consumers are sovereign as long as they know what they want and are able to act upon their desires. If consumers are tricked or fooled into making purchases that do not satisfy their wants and needs due to limited information or deceitful business practices, then consumers might not be the rulers of the economic realm. They might be pawns.

Consider the case of Curious Curt's Curio Corner. The Curio Corner sells nick-knacks, jewelry, posters, and assorted novelty items. Curt's latest novelty offering is a magnetic mood pendant purported to improve the wearer's state of mind and outlook on life and it sells for only a dollar. The Curio Corner's marketing efforts are boosted by an intense advertising campaign promoting the psychological benefits of the magnetic mood pendant.

Millions of consumers hear about the magnetic mood pendant and are swayed sufficiently by the advertising to give it a try. After all, it only costs a dollar.

Unfortunately the magnetic mood pendant has no impact on state of mind or outlook on life. It is just a magnet. It does not work. It does not really do anything. Deluged by advertising consumers buy. Millions believe it works. But it does not. And sales of the magnetic mood pendant persist. Gullible consumers keep buying. Curious Curt continues to sell. But it does not work. It does not provide the consumer satisfaction that buyers expect. Consumers are not king. They are pawns.

<= CONSUMER PRICE INDEX FOR URBAN WAGE EARNERS AND CLERICAL WORKERSCONSUMER SURPLUS =>


Recommended Citation:

CONSUMER SOVEREIGNTY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: May 21, 2018].


Check Out These Related Terms...

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Or For A Little Background...

     | three questions of allocation | second rule of subjectivity | third estate | satisfaction | efficiency |


And For Further Study...

     | seven economic rules | economic goals | dismal science | invisible hand | political views | government functions | distribution standards | market demand | demand | consumer surplus | utility | consumer demand theory | utility analysis |


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