What is the advantages of supply side economics?

vjustice4all: What is the advantages of supply side economics?
I am writing an essay for my economics class. I know nothing about supply and demand economics. PLEASE HELP. I AM STRUGGLING.
What I need to know from you is what are the pros and cons of supply side economics and..
What are the pros and cons of demand side economics?

Please, if you will, be very thorough, clear and detailed. I appreciate your answers tremendously. Thank you in advance!

Also, In your opinion, which do you feel the Government should support. Supply? Demand? or both?
My title should have read: Pros and Cons of Supply and Demand. I apologize.

Answers and Views:

Answer by foolcow
How about neither? Did your teachers forget to list that option?

In the long run, a free market with minimal taxes is best for society.

The basic reason is that any resources used by government cannot be used in applications that people actually value, as evidenced by what they’re willing to pay for volutarily. This applies both to direct government subsidies, and legal measures meant to influence things one way or another.

EDIT: The Austrian school is the only school of economics which predicted this crisis and explains exactly why it happened; when the media tells you that nobody saw it coming, they are lying. If you want to know why recessions happen, google “the austrian theory of the business cycle.” To argue that it was caused by “inadequate regulation” you would have to show that the government has not been interfering for the last few decades. This is obviously not the case, since they’ve created a central bank which regulates the most important thing in the economy, money.

Answer by Babygrand
The higher the supply, the lower the demand
The lower the supply, the higher the demand
ex: If there was a lemonade booth on every corner, each vendor would in turn compete for your business and the price of a glass of lemonade would be very low (why)high supply
On the other hand, if there was one lemonade booth within a five mile radius , the cost would be higher because of a high demand.(Low supply Get IT! I feel that the gov, should stay out of it.

Answer by SharonW
In order for a material good or service to valuable it has to meet the supply and demand requirements set by society. a scenario: you are an inventor and have just invented the prefect widget. You brother is a manufacturer and has offered to manufacture your widget at on outstanding price which allows you to sell your widget at a very reasonable price. Shipping is no problem because your sister’s new husband had a large interstate trucking firm and is willing to ship your widget for a percent of the profits. You find several national stores willing to shelf your widget on a trial basis. Now the trial agreed to by the stores has expired and there are no orders for further shipments. Why? In a word-demand. Why is demand so low? Possibly it is a luxury item and due to this sluggish economy the public is doing without many necessary items and certainly passing on luxury items. No? Then the appeal of your item leans toward women but it is not fashionable so women are passing by without it. No? There is a myriad why the public is passing by on your widget but you don’t really know the why? Maybe you need a marketing team. So now you see why supply and demand can be an inventor’s/manufacturer’s nightmare or a gold mine.

Answer by Caz
disregard that last guy. he’s stating the principles of Austrian School economics, which basically argues that all government interference is bad. The downswing we just had was likely caused by inadequate regulation, which calls that into question, and your question is essentially political, so that isn’t an answer.

WARNING! this will be long. I hate to oversimplify on this.

The basic policies in question are tax and government savings policies:
Supply side economics takes the side that the drivers of the economy are pretty much always the producers/suppliers. That means businesses. The tax policy that supply side economists push is the lowest feasible tax rate possible on the wealthy and businesses. in theory, low taxes mean that they will invest more money into new businesses or expanding current businesses, therefore creating new jobs and greater income for everyone. Fans of supply-side economics also generally want as little regulation as possible, or they want regulation that benefits certain businesses over other economic actors.

These days, supply-side economics is closely attached with Ronald Reagan’s presidency, and it’s frequently called Reaganomics or “trickle-down” economics, because the success of the wealthy will create more success for everyone. The entire strategy is based on relying on the wisdom of wealthy entrepreneurs, with the absolute minimum of government involvement. Government deficits are not usually a matter of concern.

There’s problems with this. Whether or not supply-side economics actually does anything positive for the working/middle class is doubtful. The Reagan period was marked by wild increases in the stock market activity, although the middle class was economically stagnant. Some new jobs were created, mostly in customer service, but production jobs like in manufacturing were generally sent to other countries with cheaper labor, increasing profits for businesses. Credit was made easier to obtain thanks to deregulation of finance, which increased consumer spending, but put more people in debt. The general view is that supply side economics only benefits the wealthy (there are still plenty of economists who swear by it). It has also been criticized as being inherently politically conservative, since it encourages increases for the class which already has the greatest amount of economic power in society.

Demand-side economics is another way of saying Keynesian economics, as in John Maynard Keynes. His theories on economics date back to the early-to-mid twentieth century. Keynes puts more emphasis on the demand from consumers than on the supply side, so his policies encouraged the formation and maintenance of a strong middle class through both private enterprise and government involvement. Private businesses alone could, according to Keynes, create a situation where businesses would hire as little as possible in order to maximize their profits, but in doing so would not be creating jobs and therefore not give people money to spend, resulting in a “general glut” of products and not enough consumers with money to buy them.
The welfare of the wealthy was generally treated as a secondary consideration, since investment in businesses was seen as being the job of banks, which took in money from everyone regardless of class. If a market for a good existed, the opportunity would prove lucrative at any reasonable tax rate.
The government policies Keynes encouraged were essentially to take advantage of natural up and down cycles of the economy: When there was a boom, taxes should be raised to build up cash reserves for the government, and to restrain excessive speculation in the markets. When there was a recession, the government should lower taxes and spend the money it had saved to create jobs, thus putting more money in the hands of consumers and stimulating demand.

There is some debate as to the merits of whether this policy is actually effective. Some of the policies proposed by Keynes were followed during the Great Depression, with mixed results. For example, some say that since the government borrowed a large amount of money to fund public works projects at the time, then more investors bought government bonds instead of investing with businesses, “crowding out” private sector investment. Since there was little demand or investment before the public works projects were started and therefore little reason to invest in private businesses anyway, the truth in this is up for debate.

There’s also the possibility that too much money in the hands of the middle class can increase demand to the point where prices rise in response, encouraging middle class workers to demand more pay, which prompts further prices rises, etcetera. That creates the potential for high levels of aggregate inflation.

There are a bunch of different schools of economic thought. These two represent the best known and most academically respected at the present time. The basic principles