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Supply and Demand are two of the most important forces in economics. They are so important, they have been called (respectively) the index finger and the thumb of the Invisible Hand that guides our entire capitalist economy. According to economics textbooks, they were invented by a man named "Antoine Cournot". However, several economists have noted the similarities between "Cournot" and the last name of another well-known economist, so this may be a pen name.
Supply and Demand In An EggshellEdit
Supply is a measure of how much merchandise businesses want to sell, and demand is a measure of how much consumers want to buy. When supply equals demand, the economy is in balance. Everybody can buy as many fine products as they want, everybody has a job, there is no poverty anywhere in the nation, and people happily pay their low, low taxes knowing that the government is using its money efficiently and responsibly.
But when supply and demand are not equal, all hell breaks loose. Banks close, workers are laid off, inflation skyrockets, factories are shut down, union workers riot in the streets, stock prices tumble, and the entire economy collapses into an irretrievable depression.
This is why the government spends so much time trying to figure out how to control the two variables. One way of doing this is called "supply-side" or "trickle-down Economics." This theory, which was invented by Ronald Reagan, tries to make firms make more products by giving them money. Judging from the incredible economic successes of the Reagan, Bush, and Bush presidencies, trickle-down economics are clearly the best way to promote growth and avoid recessions.