Supply and Demand
Supply and demand is a very important part of the Free Market Economy. Demand drives supply and that fuels profit. If you feel that profit is a bad word then you must hold your nose and keep reading. You need to know this more than those who think profit is a very good word. It is one of my favorite words.
Let’s start out with those in an agricultural environment thousands of years ago. They grew most of what they needed. They worked hard and planted crops and harvested them. They consumed much of it but they bartered some away for items they couldn’t grow.
At some point currency and an economy developed and then they sold crops and bought everything else that they needed. They grew what would sell and they bought what they needed. Demand identified what they would grow or make. Without demand you don’t need a supply. When there is a demand for goods and services you create a supply and start to barter or sell.
Have you noticed that so far there is no government in this concept? Demand drives Supply and that will lead to profit. Government can only get in the way and complicate or hinder the process.
I grow wheat and there are many uses for wheat, so the demand is high. I grow so much wheat that I harvest it and try to barter or sell it, but my small community can only consume so much wheat. Without a way to transport my wheat to where there is more demand, my excess wheat goes to waste as does my labor that went into growing, harvesting and trying to sell my wheat. Demand determines how much supply you need, in order to maximize your labor and profits.
Now let’s fast forward to modern day supply and demand. Manufacturers have gotten very scientific in how they measure, and how they market their products. They have many ways to help increase demand for their products and that will help increase profits.
Apple makes a group of products that is very popular and as soon as Apple launches a new product or a new version of one of their products the public lines up days ahead of time to buy those products. Demand is high, supply is manufactured to satisfy that demand and profits go through the roof. I like that kind of profit.
The Chevy Volt is another product on the market today. It’s a limited purpose vehicle with questionable reliability and some limitations. There is very little demand for this product so the manufacturer offers special deals to try and help sell it. The government, who had to step in to salvage the company who was about to go out of business, offers significant tax incentives for people who buy this vehicle, and still it can’t sell. (Can we all see why this company almost went out of business? Someone at a very high level in this organization doesn’t understand supply and demand)
We have two types of products, one that is very popular and the demand is high, government is not involved in any way other than to tax the bejesus out of the corporation making the products and each employee involved with it as well as all the sales outlets for the product. The government is raking in a lot of tax revenue because of supply and demand. High demand causes high supply, and that leads to profits and tax revenue.
The Chevy Volt was an idea best left on the shelf. It’s unpopular, unreliable, and even with significant government intervention and incentives it can not sell. There is no demand, but plenty of supply. The manufacturer wasted time and resources making it and trying to market it, the government wasted our tax money trying to save a company making decisions like this and trying to bribe the public into wanting this lemon.
The pet rock had more demand for it than the Chevy Volt. It was a frivolous product that had a flash in the pan demand for it and as supply was created it was consumed generating profit for the manufacturer. It was short lived and frivolous but it was real and the system worked. Demand drove supply and profits were generated without government intervention.
Let’s review what we’ve learned here. Supply and demand is a very important part of the Free Market Economy. Demand will drive Supply and Profits are generated as a result. This is always best when left alone. Government can only hinder the process. The Chevy Volt is an ideal symbol of what happens when Government tries to step into the Free Market and generate artificial demand. It can’t make it work when it won’t work on its own. The phrase putting lipstick on a pig suddenly comes to mind when I think of this.
The Free Market Economy is a wonderful process and must be left alone. Let individuals with inspiration, imagination, ingenuity and hard work loose in the private sector and allow them to make a profit. I recommend that they strive to make an obscene profit, because these are the very best kind of profits.
Supply and demand will generate new jobs and profits and increase tax revenues and provide an opportunity for those who are out of work and living off the kindness of government to become more self reliant.
Please let the Free Market be free and let the rich be rich, I hope to be one of them some day.