Introduction

Little more is needed to appropriately apply economics to public policy than a solid understanding of supply and demand and a willingness to ask, "and then what?" No doubt there are complicated theories and techniques that are taught in undergraduate and postgraduate economics courses, however, these are rarely applied by the public servant involved in policy. If what I have said is true, then the basic application of economics to public policy can be learnt in short time.

This blog will study media articles on current events that the author believes can be effectively critiqued using supply and demand analysis. The first few posts will be a short primer on supply and demand. If future articles require theory beyond what is contained in the introductory posts, additional theory posts will be written to support the analysis.

 I am  a public service policy analyst with an economics degree. I welcome your feedback on how to improve the blog or your engagement with the issues raised.

 One final note: I write this blog as a private citizen and note that the views expressed here are not necessarily the views of my employing agency, the public service at large or the Government of the day. Any commentary on an article that refers to partisan policy should be seen as neither an endorsement nor repudiation of that policy. 

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Demand

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In the previous post, I discussed the supply curve. This post will introduce the demand curve. The demand curve is plotted on the same axes as the supply curve: price on the vertical axis and quantity on the horizontal. Unlike supply, the demand curve slopes downwards. This means that there is more demand for goods when the price is lower. Economists usually define the demand in a market as the consumers' "willingness to pay". This is a useful way of looking at the demand curve. Let's look at an example. Once again we will use oranges. Imagine I have just returned from a long sailing trip - long because I got lost, but finally found my way home. During the trip I ran out of fresh food and resorted to eating canned food. I am craving, among other things, citrus fruit in order to ward off scurvy. As I am tying up my boat I see a  pop-up fruit vendor on the docks. The vendor is selling oranges at $2 a piece. I am more than happy to pay $2 for this orange and I de...
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Supply

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So what do I mean by supply and demand? Many people will be familiar with the graph below. It is a graph of the relationship between price and quantity in a market for a specific good. The blue line represents the demand for that good by all the consumers in that market. The red line represents the supply for that good by all the producers of that good in that market. A few things to note: A market in this sense is not just one location, it is all the places and ways that a good may be purchased. The graph represents supply and demand over a given time period. However, the time period will often not be stated and for most analysis will not be required. Supply and demand graphs will often be presented without numbers on the quantity and price axes. In public policy, we are more often concerned with the expected shape, direction of the supply and demand curves (either of these can be a straight line, but we still refer to them as a curve), and movement of the curves over time. ...
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