You know, I've lived in America all my life and the meaning of the term "supply and demand" always seemed totally obvious and self-evident. Now, however, it seems to be the source of endless confusion for the White House and others.
Like, on the supply side, seller #1 has four apples.
On the demand side, you have a shopper who wants four apples.
Nice match up. The "market" is where the buyer and seller meet to negotiate a price, which is fluid and depends on the needs and resources of both buyer and seller. The market is where they meet to negotiate a price that satisifes both of them.
In the perfect scenario above, a "balanced" market, the price would likely be the "cost" of the apples -- what it took to produce and deliver them, plus an acceptable profit for the seller, so he can sustain himself and continue growing more apples. He can't sell for less, except at a loss, which likely would result in him: A) going out of business; B) growing fewer apples. The buyer has to decide if, to him, the value of the apples is worth the asking price. If the price is too high, the buyer will have to find a substitution or go without.
OK, supplier #2 has eight apples he's trying to unload. He's produced them for sale, doesn't want to pay to store them as inventory, and they're perishable.
On the demand side, we still have the buyer who wants four apples.
Given that supply here is surplus of existing demand, and the seller is under some pressure to sell, the buyer might be able to get a lower price -- one that might represent a loss for the producer, but not so great a loss as losing the sale all together. The buyer pretty much controls this transaction, though if the buyer offers too low a price, the seller can try to find another buyer. If the buyer has to take a loss, he'll grow fewer apples, which actually would restore balance to the market.
OK, supplier #3 has two apples.
Our buyer still wants four apples, and is dismayed that only two are available.
If the supplier is smart, he'll raise the price to the uppermost limit of what the buyer is willing to pay. In this scenario, the seller controls the transaction pretty much. Greed? Yeah... also, the windfall profits can be employed to plant a couple more apple trees to increase the supply. With an increase in supply, the seller would have more apples to sell. The increased supply would restore balance to the market -- and bring prices down.
"Market balance" is achieved when the supplier accurately assesses demand and is able to meet demand at a price that is acceptable and even satisfactory to buyer and seller. After all, the whole object of the seller's activity is to produce and sell apples. Otherwise, he might as well retire to Florida.
So Gingrich -- and everyone else with a brain in their head -- says the price of gasoline will come down if the supply is increased. Additionally, the way this particular market is structured, the price will come down on ANTICIPATION of increased supply in the future.
The Comrade says, no, supply doesn't have a thing to do with the price. Then totally contradicts this statement by saying that if you want to reduce the price, you have to reduce demand.
Well, yeah, Given four apples. Now the buyer only wants two instead of four. You're still dealing with fundamental supply and demand. He's trying to increase the supply -- and lower the price -- by decreasing demand. Get it?
Apparently the Comrade doesn't get it. He's apparently never read Adam Smith, Milton Friedman, or any of those guys, only Marx and Saul Alinsky. But you see, even Marx and Alinsky can't escape from the rules of supply and demand. They can only try to manipulate it to achieve some bizarre outcome based upon their personal utopian fantasies.
See, if the Comrade can keep supply tight, the price will remain high in order to discourage demand.
Ready to give up your car? Want to pay twice a much to heat your house?
The supply and demand thing also applies to coal and natural gas. How much do you want to pay for electricity. Think demand for electricity is going to go down any time soon?
What will all this do to the cost (and eventually the price) of everything that requires energy for its production -- which is basically... EVERYTHING WE USE AND CONSUME.
Get it?
Supply and demand is the very heart of what's called "the free market." You start messing with this, you throw a wrench in the mechanism. It won't work anymore. And it's not working with the Comrade fiddling with it. And I'm sure he knows that.
Get it?
Save the Republic.
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