Towards a Quality-Centered Economic Analysis: Some Simple Diagrams.

This paper puts the role of product quality in the market game of supply and demand into the center of the analysis. To that purpose it provides a systematic investigation of market diagrams with quality instead of price on the ordinate. This new focus allows interesting conclusions by simple application of well-known diagrammatic methods. For instance, as far as single markets are concerned, it is shown that providing consumers with information about product quality may increase or decrease quality in the market, depending on the type of information provided. Another conclusion of practical relevance, concerning the macroeconomic activity level, is that an effective demand problem may be caused if present product quality is too low compared with the product quality expected for the future. Copyright 1992 by WWZ and Helbing & Lichtenhahn Verlag AG