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Innovation By DemandAn Interdisciplinary Approach to the Study of Demand and its Role in Innovation$
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Andrew McMeekin, Mark Tomlinson, Ken Green, and Vivien Walsh

Print publication date: 2002

Print ISBN-13: 9780719062674

Published to Manchester Scholarship Online: July 2012

DOI: 10.7228/manchester/9780719062674.001.0001

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Variety, growth and demand

Variety, growth and demand

(p.41) 4 Variety, growth and demand
Innovation By Demand

Pier Paolo Saviotti

Manchester University Press

Modern economies contain a large number of entities (products, services, methods of production, competences, individual and organisational actors, institutions), which are qualitatively novel and different with respect to those existing in previous economic systems. In other words, the composition of the economic system has changed enormously during economic development. The role that variety can play in economic development has important implications for economic theory, including the theory of demand. This chapter offers a theory of wants and preferences which assumes that consumers will start consuming a given good/service only when they achieve a critical income. In order for variety to increase in the course of economic development, new goods and services must be ‘added’ to existing ones. One of the possible bottlenecks in economic development is constituted by the imbalance between productivity growth and demand growth within given sectors. A way to overcome such a bottleneck is represented by the emergence of new sectors, providing compensation for the displacements caused by the imbalance in existing sectors.

Keywords:   variety, productivity growth, demand, economic development, wants, preferences, goods, services, income, consumers

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