Partial products and complex products

Questions
1

Hello together,

a question I am really interested in is how this concept handles complex products that constist of many partial products.

Lets say a wind turbine. It constists of thousands of smaller products that are not bought by any customer directly but are produced distributed around the world. For example gears, big electricity generators and so on. These partial products can also constist of further smaller partial products.

As I understood this concept only makes prices on a consumer level and the level of the direct final manufacturer. But the final manufacturer needs now a lot of partial products. How can he then signal his component supplier how much and what partial products he needs? In market economics this is done via the price signal. Please also note that there are many partial products that are not only produced for one final product only. So there is a complex distribution chain.

Best regards,

Falk

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2

Hey Falk,

I think the economist terminology for this is “intermediate goods”. These goods work the same way as final goods during the procedure. The people who make intermediate goods propose a certain level of production, and the people who need these goods for their “final goods” ask to consume a certain amount. Prices then adjust based on supply and demand until the entire plan is feasible.

In short, the rules of the procedure apply to all goods and services in the entire economy.

PS: Welcome to the forums!

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