Supply and Demand - Term Paper Example

Third, if demand remains unaffected and supply rises, there will be surplus causing a decreased equilibrium price. Fourth, if demand remains unaffected and there is a decrease in supply, there will be a shortage causing an increased equilibrium price. This paper will look at supply and demand. On the supply side, it will discuss Ronald Regan, and on the demand side, it will look at Franklin Delano Roosevelt (Caplin and Schotter 43). The paper will go on to highlight the difference between supply and demand while looking at the economic environment then and now, and other components such as interest rates, housing market, etc.

Supply side economics is a branch of macroeconomics which asserts that economic growth may be most adequately developed by lessening barriers for individuals to produce services and goods, for example, lessening capital gains tax rates and income tax, and by permitting enhanced flexibility by lessening regulation. Consistent with supply side economics, customers will benefit from a significant supply of services and goods at decreased prices. Standard supply side economists’ policy recommendations are less regulation and lower marginal tax rates.

The Laffer curve symbolizes a principle of supply side economics that government tax revenues from a specified tax are identical at100% tax rates as at the 0% tax rate correspondingly. The tax rate which attains the highest or optimum government revenues is placed in the middle of the two values. Reaganomics is an example of supply side economics. Reagan aspired to control the growth of special spending and promote entrepreneurship as well as the decrease of inflation and regulation (Caplin and Schotter 56).

During the Reagan era, the economic growth was approximately 3.2%. During the Ford and Carter era, the economic growth averaged 2.8%. In subsequent years, the economic growth averaged 2.1%. In addition, during the Reagan era, the real median family income rose by $4,000 after experiencing no rise before the Reagan era. Nonetheless, in the post-Reagan era the median family income experienced a loss of approximately $1,500. Moreover, the unemployment rate, housing sector, inflation, and interest rates declined rapidly under the Reagan administration than they did instantly after or prior to his leadership.

The sole economic variable that was worse in the Reagan era than in both the post- and pre-Reagan periods was the savings rate, which rapidly decreased in the 1980s. Also, the productivity rate was elevated in the pre-Reagan era but much lesser after the Reagan presidency. Demand side economics refers to the economic model which proposes that economic inspiration comes adequately from enhancing the demand for services and goods. This notion is typically placed in direct contrast with supply side economics.

Similar to a large number of economic theories, it is extremely easier to comprehend the standards of demand side economics in theory instead of practice. First and foremost, demand side economics is a way of eliminating an economy of recession and accelerating economic growth while thwarting inflation. It is meant as a restraint on both retraction and enlargement to keep an economy in a steady state. The concept is that to accelerate growth, an administration should decrease taxes on the working and middle class and enhance government spending.

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