Demand/Supply Side Economics

For those of you who have never had a business class, specifically economics, let me share the basics with you.

There are two economic forces...  the seller and the buyer.

The seller is referred to as the supplier of goods and services and they buyer is referred to as those individuals who demand goods or services.  Thus we have supply and demand.  (See chart below)

There is a logical reason why the red and blue lines go in the directions they go in, but I will talk about that later.

Where these two lines intersect is called the equilibrium because it is the ideal point at which quantity is aligned with price.  If you price is higher then you will sell less and if your price is lower you will sell more but you may not cover the cost you laid out for supplies and labor.

One economic theory says is you stimulate the demand side, that the economy will grow...  beecause you have given the buyer more money to spend.

In order for this to happen, you need to give the buyer more money to spend with pay raises or lower taxes.

However, the the supplier does not meet the increased demand, there will be a shortage and the price will increase.

Another economic theory says if you stimulate the supply side, more goods and services are available, which means the price will go down, the the buyer will buy.

However, if the buyer does not have the desire to purchase that item, then the excess inventory will not be sold, and the supplier loses money.

Which side do you stimulate?

Which side is the correct side to stimulate?

The COVID stimulus monies stimulated the demand side...  BUT, due to COVID many people were not working, so the supplies reduced...   Consequently, fewer items meant higher prices, and we encountered inflation.

As mentioned before, the only way to stop inflation, is to take money out of the economy.