The Simple Mechanics of Supply vs. Demand
A good share of readers who do business with EXPERIENCE know that I carry two Masters Degrees.
One is an MBA and the other an MA.
I joke that I got the MBA to learn what drives the demise of many brands and the MA to learn what drives the demand for many brands.
However, in my securing the MBA degree, I took a couple of classes in Economics in which I learned the concept behind the demand-supply model.
I do not believe that the current President of the U.S. has an MBA degree.
Few in Congress and the Senate can sport one as well.
I am not even so sure that those running our national economics lay claim to MBA degrees… now PhDs in economics and political science… for sure.
The demand-supply model is not very complicated. Even the physics of balance are not complicated.
If I could get “A’s” in those classes it could not have been too difficult.
In those economics classes I learned how a balance between demand and supply crafts a model of stability… even a psychographic sense of balance and mediation.
Now there are factors that can drive that balance.
For example, when demand excels and supply cannot meet demand it drives prices higher. And when supply exceeds demand it drives prices lower.
The Pandemic did affect supply channels here in the U.S. … shoot in others areas around the world too.
If you think that the mask mandate was a pain in the butt when you went to dine out, think about how much the mask mandate was a pain in the butt among those trying to run a product assembly line.
It wasn’t that long ago when the news networks had story after story after story about the vacant shelves in the retail stores.
Now I guess you can blame the Boomers who bred the Millennials, but as the Millennials couple and make babies the demand for baby food and groceries and house & home products and land & garden products and clothing and… the list goes on… is rising faster than most any time ever before in history.
As I shared earlier, the demand-supply model is not very complicated. If demand goes up, supply has to increase too.
If supply cannot go up, then what supply is there goes up in price.
Now the Blinding Glimpse of the Obvious — the BGO — answer on what to do next is not complicated… the supply has to be increased.
However, those in Washington who did not take those required base classes to secure an MBA apparently did not attend any of those lectures.
This morning’s WSJ chief editorial captured it better than I can…
“The Fed is now trying to squeeze demand — that is, reduce consumer and business spending — and the President could help mitigate the economic pain with regular and fiscal policies that boost supply.”
The Fed can also remove obstacles that might get in the way of increasing the supply side of economics. Local governments too.
But you don’t have to have a PhD to understand the absurdity of just what is taking place.
As the WSJ editorial goes on…
“But he’s (Biden) is doing the opposite with tax increases and new regulatory burdens.”
Biden’s fellow frat bothers and sisters are raising the interest rates to tighten back demand.
Now if the demand were artificial and/or fueled by a quirk, then perhaps restricting demand could have at least some degree of rationale to it.
But the Millennials making babies isn’t a quirk. And the Millennials aren’t going away any time soon.
As I have shared in this column, there are many business, political and community leadership who still believe that Millennials are the ones taking those college course and walking the streets demanding a solution to Climate Change.
Not only are those not the Millennials, in 2023 there will be more Millennials in their 40s than Millennials in their 20s.
And not say a few Millennials might still post Climate Change content on Facebook, the vast majority of Millennials are posting issues relative to where tax dollars are going to improve education, the roadways in front of their homes along with the ridiculous costs to remodel and the frustrations in finding the supplies.
And those replying to the posts add commentary on baby food and diapers.
The Demand-Supply model is not complicated.
If I can understand the economics behind Supply and Demand, I would have to believe that most elected leadership could as well.
For those politicians who are convinced that Washington is on the right track going into this election year, I have a digital class they can take for the small tuition cost of $5,000 about Alchemy and how it funds political campaigns.