Answer to Question #80254 in Microeconomics for Diamond

Question

In what way are entrepreneurs and businesses at the helm of the economy, but commanded by consumers? Apply our circular flow economy.

Answer 1

Entrepreneurs in the market are free. They sell everything they like. Today they want to sell services. They do. Tomorrow they will change their minds and will produce some goods. They make their decisions themselves: what to produce or sell, when to produce or sell, where to produce or sell, at what price to sell. They are free. They are really at the helm of the economy.
However, everyone knows: "customer is always right". Whatever the entrepreneur does, he must satisfy the needs of the buyers. If he does not do it, he does not sell his goods. He has losses. Therefore, he tries to find customers’ desire to satisfy them. You can see, entrepreneurs and businesses are commanded by consumers.
We need remember that everyone is a part of circular flow economy. Entrepreneurs hire workers, these workers buy goods of these entrepreneurs. But they are free in their choice. And they make their decisions. So, the conclusion “entrepreneurs and businesses are at the helm of the economy, but are commanded by consumers” is correctly in our circular flow economy.