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MARKET FAILURE: A condition in which a market does not efficiently allocate resources to achieve the greatest possible consumer satisfaction. The four main market failures are--(1) public good, (2) market control, (3) externality, and (4) imperfect information. In each case, a market acting without any government imposed direction, does not direct an efficient amount of our resources into the production, distribution, or consumption of the good.
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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 KingConsumer 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 PawnsConsumers 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.
Recommended Citation:CONSUMER SOVEREIGNTY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2023. [Accessed: October 4, 2023].
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WHITE GULLIBON
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Today, you are likely to spend a great deal of time flipping through mail order catalogs trying to buy either a flower arrangement for that special day for your mother or a New York Yankees baseball cap. Be on the lookout for rusty deck screws.
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Ragnar Frisch and Jan Tinbergen were the 1st Nobel Prize winners in Economics in 1969.
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"Those who are blessed with the most talent don't necessarily outperform everyone else. It's the people with follow-through who excel. " -- Mary Kay Ash, May Kay Cosmetics founder
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NEDO
National Economic Development Office
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