But if restaurants can only serve a smaller number of customers as a result of social distancing, then the supply curve will remain flatter than the demand curve. The only way the restaurant can stay in business in that scenario is to put prices up, which is inflationary, and will reduce demand.
More broadly in the economy, if employers have to take measures such as providing hand sanitisers or masks for staff, this would push the cost of bringing goods to market upwards, and that is something which flattens the supply curve.
A scenario where supply side pressures push prices up, but demand is too weak to sustain the higher prices and so falls, but not in a way that causes prices to fall, is called stagflation.
This means that while the demand curve is flat, the supply curve is rising, because the costs of supplying goods and services is higher.
The problem governments are faced with in this scenario is that if they act to increase demand, then this creates more inflation, which eventually becomes a drag on demand, causing it to fall, while the inflation caused on the supply side remains.
If policy makers try to flatten the curve on the supply side as a way to push prices down and boost the demand side of the equation, then the likelihood is some firms would close as they would be unable to absorb the higher costs, and this would lead to unemployment and lower overall demand in the economy.
Table below provides initial broad-brush estimates of the costs of various policy interventions, although its coverage is not yet complete
| Updated 30 April | £ billion, 2020-21 |
| Direct effect of Government decisions, of which: | 103.7 |
| Spending | 99.3 |
| Tax | 4.4 |
Source: OBR
Flattening curve
The UK existed in a stagflationary scenario in the 1970s, and the response of policy makers in the 1980s was to focus on flattening the supply curve via driving inflation downwards, and let a demand shock happen, including higher unemployment.
Mr Buxton doesn’t believe stagflation will happen in the UK.
He says: “The impact on demand from the higher levels of unemployment we are about to witness will keep inflation low, and while companies may face higher costs.
"The prevailing public attitude will mean they are unable to pass those costs onto the end consumer, with the result that corporate profits will be lower.”
Anthony Rayner, multi asset investor at Premier Miton says significantly higher unemployment means that employers will not need to grant pay rises, and this will prevent supply-side inflation becoming much higher.
