The term dollar voting is an analogy which purports to characterize the process of economic resource allocation through the relative sums of money spent on various goods and services.
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Overview
Consumers are said to vote for the products on which they spend their dollars.[1] In Principles of Economics courses, this is used to describe the process by which firms decide the products that they produce. Products that consumers buy will drive future production choices. Products that do not sell as well as expected will receive fewer productive resources in the future. Effectively, consumers are voting for "winners" and "losers" with their purchases. This is used as a fundamental argument in favor of market allocation of goods and services as consumer sovereignty is said to determine future investment and production choices.
Criticism
Some economists, such as Amartya Sen, have said market institutions may not lead to desirable outcomes when agents lack full information about the underlying goods and services.