One of the many ridiculous propositions of microeconomic theory is that economic agents, consumers, seek to "maximize utility." This immediately entrains another ridiculous assumption, i.e., "perfect information." Economic agents must have instantaneous access to perfect information in order to make their utility-maximizing purchase decisions. This sounds like an "if a frog had wings, he wouldn't bust his but when he landed" situation.
On the supply side, there are other ridiculous propositions. Suppliers seek to maximize profit from sales, or output, according to microeconomic theory, and this brings us to the phantasmagorical idea of the "supply-demand curve."
|fig. 1. Supply Demand Curve|
Here we have what looks like an over-constrained, self-referential snapshot of a dynamic system. How much will "they" buy? However much you can sell at the price they want to buy at. How much can you make (and sell) at that price? However much they will buy at that price, whatever it is. We have two functions, Demand, D, and Supply, S, both of which depend upon Quantity, Q (the x-axis), somehow yielding Price, p (the y-axis). So we have:
One wonders how the demand and supply functions "know" what the price is. Then we talk about an equilibrium quantity, Qe, that yields an equilibrium Price, pe, which gives us:
A curve (or function) implies a derivative. A change in quantity, dQ, sold implies a change in unit price, dp, but it also implies a change in the population of consumers, dC, purchasing the product. By the way, the total revenue for a product is the amount spent by all the consumers of that product (the quantity, Qe) at a given price, or Qe * pe. It has to be the equilibrium quantity and price, by the way, since this is the only place where we have a market. This is another magical aspect of the Supply Demand Curve, that is, that both curves are meaningless anywhere outside of where they cross. "How much would people buy at another price?" We don't know, because this represents an impossible, entirely hypothetical, experiment.
Getting Real about Supply and Demand
We have to be real about how there's a certain limited population who is able to buy our product, and that everywhere the quantity goes down or up, a certain quantity of people have become predisposed or indisposed to buying your product. Now, the total of all Qe at a given snapshot is not the same as C (total consumers) since individual consumers may buy other products (4). We can say that all of the price times quantity for all products is equal to the total amount spent by all consumers. If we talk about all the equilibrium quantities, one through n, Q1e...Qne, and prices, p1e...pne, we can talk about the total expenditure on all products, or Sum(Qe * pe, over whole population). This is the same as total revenue, by the way.
But who bought what?
In macromemetics we think in terms of a population (3), some of whom might be predisposed in some degree to buy our product. The Supply Demand curve has to take this into account.
We have a population of real people, and the act of a given individual buying a given product is a meme and depends upon how effectively that meme has been injected, and the likelihood of that meme being deployed by that individual, m. The total likelihood, the total number of individuals (1) buying the product, M, is Sum(of m, over population).
The predisposition to a memetic deployment is a very real thing and is possible to measure. It can be determined for a given individual, but more importantly it can be determined by historical data or by observing the media and human behavior (2).
An agent can be predisposed to multiple different purchase decisions, and as is well-known in the grocery store business and elsewhere, certain often strangely unrelated products can influence each other's rates of purchase. At this point I would make the assertion, which perhaps I'm not ready to offer satisfactory proof, that purchase decisions are driven by the laws of macromemetics, and not by some concept of "maximal utility." One fun way to have both cake and to also eat it would be to assert that "marginal utility" and "maximal utility" are both memes that are used to justify purchase decisions.
That may be a little too self-serving. It may be correct, but I can't say that microeconomics is wrong, and that macromemetics does a better job because microeconomic axioms are really just memes in the end.
I submit that "individual utility" is an imaginary quantity, while "individual predisposition to purchase" is in fact measurable. That means that the quantity at price, that is, the revenue for a given product, among many, can be assigned to a large collection of decision processes, the underpinnings of which can actually be measured. Let's call the collection of all consumers C (c1...cC). The collection of all memes, M, composed of individual memes, m1...mM, is all of the possible purchase decisions for all products. So the predisposition of all consumers (1,3) to buy product #1 is Sum(over all consumers C, m1) or Sum(C, m1) = Q1e.
Then we could talk about how price influences each individual consumer's decision to purchase. "m1(c1)" is the probability of consumer #1 buying product #1. At this point we can suggest that the whole idea that demand changes in the kind of direct relationship portrayed in the supply demand curve is simply not true. Again, I may be beggaring the question by saying that consumers consume based on their perception that a purchase is a good idea, or that other memetic fabric members will see it as a good move, as opposed to a perception of "utility." (5)
Can we draw some equivalencies? The total revenue may be a useful quantity. The supply demand view of revenue for a product #1 is Q1e * p1e = R1 or the revenue for a given product #1.
The macromemetic take is Sum(C, m1) = M1 which is the total number of consumers who decide to purchase product #1. What about the price? We don't seem to know what the equilibrium price is for all these purchases. Now it's time to admit the fact that a price is set by the vendor and can be set at different values by different vendors to different buyers, and so on (6). So let's just talk about some set price, an "aggregate price," or p1. So that gives us Sum(C, m1*p1) = R1. Dividing both sides by the price, we see that Sum(C, m1) = Q1e, approximately, or that the total quantity purchased by a population, an elusive value, is the same as the total aggregate disposition to purchase within a population, a quantity which can be measured.
Total Market Revenue
The supply demand curve model for products 1 through n, with prices p1e through pne and quantities Q1e through Qne. Revenue for a product is R1 = Q1e * p1e. Total revenue would be Sum(over 1 to n, Qe * pe) = R.
For the macromemetic view, revenue is Sum(over all consumers, over all memes, m*p) or Sum(C, M, m*p) = R. So we see how the set of all consumers making purchase decisions [C, M] = [Qe] maps onto the set of all "equilibrium quantities." If we multiply in price matrices, we get revenue. [C, M] * [p] = R resembles [Qe] * [pe] = R.
If we reject the idea that "price" or "equilibrium price" has any special meaning or predictive value, as opposed to just the "de facto price," then we see how a macromemetic model can actually predict the sold quantities, yielding the kinds of numbers we would hope for from a real, non-phantasmagorical supply demand curve, that is, the quantity numbers.
Summary & Conclusions
The concept of a supply demand curve illustrates an idea which we like to believe, that there is some "equilibrium" price and quantity for a market for a product. This value seems impossible to measure, however. We are also told that microeconomic agents seek to maximize "utility" but it's deeply unclear how this decision process might work, since it depends upon, among other things, "perfect information (7)."
Macromemetics to the rescue. While an equilibrium price or quantify of a market may be impossible to even guess at, the predisposition of memetic agents to purchase any given product, even for an entire population, can be assessed, even with a fair measure of accuracy. If we replace this idea of "equilibrium price" with some "real price," we can determine the overall revenue for sales of a given product.
If we look at "total revenue" we see where macromemetics can fill in the details that a supply demand curve can't nail down. In other words, macromemetics gives us ways to nail down the "quantity" and "price" values which seem to float wildly in the supply demand curve model.
In sum, macromemetics allows us to actually model, even measure, the price and quantity values pointed to by the supply demand curve. If we examine values such as "product revenue" or "total revenue" we can see how to match up these values. Instead of "demand" we may begin to think in terms of "attention," "awareness," or "memetic predisposition" to purchase a product. "Is this person aware of my product?" or "How likely is this person to buy my product?" The collected effect of those predispositions (8) can directly give us the numbers we want, in a way that a supply demand curve never can.
(1) This gets into deployment theory, i.e., how to determine the likelihood of an individual deploying a meme in a given context. Historical behavior is useful in memetic predictions. Deployment in real life is non-heterogenous, varies across individuals, e.g., higher status individuals might be more likely to deploy choice memes, or have different memes to deploy. One simple model, which we use here, is that, for example, if 100 memetic agents have a 1% propensity to deploy a meme, then the total for such a memetic fabric would be one memetic deployment.
(2) There are things akin to "the T-shirt test," or where you wear a T-shirt with a slogan or icon on it around to see how many people recognize it. Basically, eliciting passive reactions. Polling and getting consumer reaction is not a new thing to PR, marketing, sales, and other disciplines. Macromemetics may point the way to more techniques and technologies which are either cheaper, more effective, or both.
(3) We also think it terms of a cohort, which is a specific subset of a population, like the collection of people willing to buy our product. In such a case, we'd describe "the cohort of the meme to purchase product X."
(4) We could imagine some kind of simple model where there's only one product, and the consumers either buy or not, but this doesn't seem useful.
(5) There are lots of "yes, but" examples in microeconomics such as "inverse demand" and "inflexible demand" where a product is more in demand the more it costs (cheap goods become perceived as luxuries merely because of high price) or where the demand for a product does not slack off even as the price rises (medical demand is an example).
(6) Nobody setting the price has any meaningful access to this magical quantity of "equilibrium" price. Even charging "what the market will bear" is a fairly slippery concept, but finding such real-life prices is the bread and butter of sales and marketing staffers.
(7) The name itself suggests an absurd idea.
(8) One point is that the more people decide to buy a product, the more that other people will be persuaded to do the same, and the reverse is true also. This is a memetic phenomenon and may be yet another thing not understood by a supply demand curve. Utility seems all the more ridiculous when one looks at things like cigarettes, sugar drinks, impractical motor vehicles and toys, etc. which are harmful, useless, driven by memetic, other-driven decision processes. It's based less on "this would be good for you," and more about "you should do this," or "others will think you're cool if you do this."