A metropolitan area is mainly composed of wealthy business people, who provide amenities to the people living there. By their nature, these areas are mostly faced with the challenge of overpopulation where the amenities they provide are strained. This being the case, the demand in these areas mostly exceeds supply. When demand is low in any given market, the suppliers focus their effort in stimulating demand. However, in the metropolitan areas, the demand is very high and mostly more than supply. The metropolitan areas, which represent the suppliers of amenities, do not need to stimulate any demand. Since they are unable to satisfy the existing demand, they can maximize their revenue by focusing their efforts on the supply side. By doing this, they will be attempting to offset the high demand and return increases their revenue. The demand and supply sides of economic base are actually based on the demand-side economics and supply-side economics respectively (Sullivan and Sheffrin, 2003).
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There are different factors that influence both the supply and demand sides. Inflation is a factor that influences the demand side of the economic base. Proponents of this theory assert that economic growth can only be stimulated by manipulating factors that influence the demand side. Using the case of metropolitan, the rate of inflation can be reduced by increasing taxes on the metropolitan business men who are on the supply side and reducing government spending. Government regulation is one factor that influences the supply side of demand. Advocates of supply side economics argue that consumers are likely to benefit from reduced government regulation that comes through increased taxes. Reducing taxes for suppliers would lead to stimulated economic growth because buyers will afford goods and services since they are lowly priced. Consequently, demand is stimulated, which leads to purchasing. Purchasing ensures a healthy circulation of money and thus reduced inflation rate.
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