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If we were to enter a period of recession, what would likely happen to demand? What...

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user84631 | eNoter

Posted March 26, 2013 at 6:43 AM via web

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If we were to enter a period of recession, what would likely happen to demand? What would likely happen to the unemployment rate and the poverty rate?

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psyproffie | College Teacher | (Level 1) Assistant Educator

Posted March 26, 2013 at 8:39 AM (Answer #1)

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Recession is an economic term however it is related to the social sciences in the sense that it has a diret effect on the job market, which has an effect on an individual's ability to maintain employment. When recession occurs the unemployment rate goes up among the general population as companies are unable to maintain employees within their company. Recession also has a stronger effect on those already living within poverty as it negates their ability to get out of poverty.  Unemployment can lead to someone living below the poverty line when they were not there previously, and in time of a recession large numbers of people can fall below the poverty line.

This phenomenon has a direct effect on the concept of supply and demand when a large portion of the population does not have disposable income as they will not spend money on unnecessary items which drive the market. This creates a cycle where the supply outpaces the demand within the market leading the companies who produce and sell the products to having surplus of product and often a surplus of employees who create and sell the product. This can lead to further layoffs which increases or maintains the jobless rate.

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