Reason 1 for inadequacy of the forces of supply and demand

The first reason is that the forces of market supply and demand do not represent the economic need of all the people equally in the way, say, voting by ballot represent their political need in a democracy. Market demand is naturally weighted in favor of those who can spend more on their purchases. Therefore, the rich man’s luxury makes a greater claim on the resources of the economy that the poor man’s necessity. A private car might, for this reason, be more profitable to produce than a public bys, even though the latter solves the transport need of a far large number of people.

For the same reason, from the point of view of supply, the allocation of resource for production between cosmetics and medicine, between cinema houses and hospitals, between big city building and rural housing and so on, does not reflect the choice of everybody’d need equally. For example, the poorer people may want the medicine, but the rich may more effectively demand the cosmetics. The poor may want the hospital service by the private investor may still find it profitable to build the cinema house. And market by supply catering to the need of the stronger economic groups because voting for allocation of resources thorough the market does not go by the rule of one person one vote. The mechanism is weighted in favor of the larger spender of investor.