Economics 101: The Law of Supply and Demand

Will outsourcing the Washington State Department of Printing really reduce printing costs? Really?

Let’s think back to entry-level economic theory—Economics 101. Remember the Law of Supply and Demand? It’s a straightforward concept. According to the Web site Investopedia:

“Supply and demand is perhaps one of the most fundamental concepts of economics and it is the backbone of a market economy.” Demand refers to how much (quantity) of a product or service buyers want/need. Supply represents how much the market can offer. The correlation between price and how much of a good or service is supplied to the market is known as the supply relationship. Price, therefore, is a reflection of supply and demand.

In practice it’s really pretty simple. Let’s say that yesterday you could buy widgets for some price, but last night a good size chunk of widget-producing machines broke down and there are fewer widgets available today (supply drops). If consumers still need the same number of widgets, what happens? The folks that need widgets start offering more for the widgets that are available, and the price of widgets goes up.

Or, if the number of widgets that can be produced stays the same, but suddenly more people want more widgets, the same thing happens. The price goes up.

Think OPEC. What happens when OPEC cuts back on oil production but the demand for oil stays the same or grows? The price of oil goes up. Right?

Whether it means to or not, if Senate Bill 5523 (the bill seeking to close the Washington State Department of Printing) passes, the Legislature in the state of Washington will be in a position similar to that of OPEC. The bill will close the Department of Printing, a major component in the overall supply of printing in that market. If the Department closes, what happens to supply? It goes down. Supply will decrease by the amount of work printed at the Department of Printing, currently estimated at about $20 million per year.