Demand (economics)

“ The principle, that value is proportional to cost of production, being consequently inapplicable, we must revert to a principle anterior to that of cost of production, and from which this last flows as a consequence,—namely, the principle of demand and supply. ”

“ There is a demand for a certain quantity of the commodity at its natural or cost value, and to that the supply in the long run endeavours to conform. When at any time it fails of so conforming, it is either from miscalculation, or from a change in some of the elements of the problem: either in the natural value, that is, in the cost of production ”

“ But we should never forget that there is no service or commodity produced by man, however essential it may seem, the demand for or the supply of which might not be reduced to nothing, if the price were sufficiently raised on the one hand, or lowered on the other. ”

“ We have thus far supposed that all the means and appliances which enter into the cost of production of commodities, are things whose own value depends on their cost of production. Some of them, however, may belong to the class of things which cannot be increased ad libitum in quantity, and which therefore, if the demand goes beyond a certain amount, command a scarcity value. ”

“ The whole quantity of industry annually employed in order to bring any commodity to market, naturally suits itself in this manner to the effectual demand. It naturally aims at bringing always that precise quantity thither which may be sufficient to supply, and no more than supply, that demand. ”

“ To recapitulate: demand and supply govern the value of all things which cannot be indefinitely increased; except that even for them, when produced by industry, there is a minimum value, determined by the cost of production. But in all things which admit of indefinite multiplication, demand and supply only determine the perturbations of value, during a period which cannot exceed the length of time necessary for altering the supply. ”

“ When, therefore, two or more commodities have a joint cost of production, their natural values relatively to each other are those which will create a demand for each, in the ratio of the quantities in which they are sent forth by the productive process. ”

“ All economists recognize the fact that the immediate determiner of value is the relation between supply and demand. These terms in their economic sense mean something more than mere desire and mere quantity. Supply means the amount offered in exchange, and demand means not only a desire, but a desire coupled with the ability and willingness to give other commodities in exchange for the one wanted. ”

“ Let us sum up in a general form our conclusions as to the way in which changes in the supply or demand of a commodity react upon the demand or supply of the other things with which it is jointly demanded or supplied. Everything turns, as we have seen, on the possibility of variation in the proportions in which the things are used or produced together ”

“ Cairnes213 fitly says: “The supply of a commodity always tends to adapt itself to the demand at the normal price. I may here say briefly that by the normal price of a commodity I mean that price which suffices, and no more than suffices, to yield to the producers what is considered to be the average and usual remuneration on such sacrifices as they undergo.” ”

“ You say demand and supply regulates value [sic] ; this I think is saying nothing, and for the reason I have given in the beginning of this letter: it is supply which regulates value [228] , and supply is itself controlled by comparative cost of production. Cost of production, in money, means the value of labour as well as profits. Now, if my commodity be of equal value with yours, its cost of production must be the same. But cost of production is, with some deviations, in proportion to labour employed. ”

“ As the whole of the goods in the market compose the demand for money, so the whole of the money constitutes the demand for goods. The money and the goods are seeking each other for the purpose of being exchanged. They are reciprocally supply and demand to one another. It is indifferent whether, in characterizing the phenomena, we speak of the demand and supply of goods, or the supply and the demand of money. ”

“ We shall do well to cultivate a lively sense of this symmetry, for it will frequently save us from ignoring factors which have a vital bearing on the problems we are considering. We should never leave an important feature of demand without turning to see whether it has a counterpart on the supply side, though indeed we may not always find one. In the last chapter we examined the relation between utility and price, and found that the true relation was between the price and what we termed the marginal utility. Corresponding to utility on the demand side is cost of production on the supply side. ”

“ The general idea which he had derived from commercial experience, without being able to analyze it, was, that when the demand is constant, the price varies as the quantity of labour required for production; or, -- using the formula I gave in last paper -- when y is constant, x y varies as x. But demand never is, nor can be, ultimately constant, if x varies distinctly; for, as price rises, consumers fall away ”

“ But cost of production is the chief factor which, in the case of commodities, ultimately determines the conditions of supply. Utility, similarly, is the chief factor which ultimately determines the conditions of demand. Must not then the symmetrical relations between demand and supply be reflected in a corresponding symmetry between the utility and the costs which underlie them? Demand springs obviously from utility; the only motive for buying anything is that it will serve some real or fancied use. Can we then accord to demand so dignified and to utility so subordinate a place? ”

“ The economists who discovered that demand created supply soon had to limit the proposition to "effective demand," which turned out, in the final analysis, to mean nothing more than supply itself; and this holds good in politics, morals, and all other departments as well: the actual supply is the measure of the effective demand; and the mere aspirations and professions produce nothing. ”

“ The price of the one species of commodities varies only with the variations in the demand; that of the other varies not only with the variations in the demand, but with the much greater, and more frequent, variations in the quantity of what is brought to market, in order to supply that demand. ”

“ The internal actions constituting social functions, exemplify the general principle no less clearly. Supply and demand are continually being adjusted throughout all industrial processes; and this equilibration is interpretable in the same way as preceding ones. The production and distribution of a commodity, is the expression of a certain aggregate of forces causing special kinds and amounts of motion. The price of this commodity, is the measure of a certain other aggregate of forces expended by the labourer who purchases it, in other kinds and amounts of motion. ”

“ Besides, a person engaging in the production of any kind of goods, can, as a rule, only seldom directly investigate the relation between supply and demand. Generally, he can do no more than compare the market price of the commodity with the cost at which he can produce it. ”

“ In order to apply this principle, with any advantage, to the solution of the question which now occupies us, the principle itself, and the idea attached to the term demand, must be conceived with a precision, which the loose manner in which the words are used generally prevents.
It is well known that the quantity of any commodity which can be disposed of, varies with the price. The higher the price, the fewer will be the purchasers, and the smaller the quantity sold. The lower the price, the greater will in general be the number of purchasers, and the greater the quantity disposed of. ”

“ The nature of demand is to encourage industry; and when it is regularly made, the effect of it is, that the supply for the most part is found to be in proportion to it, and then the demand is commonly simple. It becomes compound from other circumstances. As when it is irregular, that is, unexpected, or when the usual supply fails; the consequence of which is, that the provision made for the demand, falling short of the just proportion, occasions a competition among the buyers, and raises the current, that is, the ordinary prices. From this it is, that we commonly say, demand raises prices. ”

“ If there be no free competition between industries, then the value of those commodities which has been said, in the above classification, to depend on cost of production, will be governed by the law of Reciprocal Demand. ”

“ Prices, as we have now seen, are only a subordinate form of Values: the universal law that regulates all the variations of them both, within certain fixed limits to be examined shortly, is called the Law of Supply and Demand. ”

“ The Laws of Supply and Demand may be thus stated: a rise of price tends to produce a greater supply and a less demand; a fall of price tends to produce a less supply and a greater demand. Conversely, an increase of supply or a decrease of demand tends to lower price, and a decrease of supply or an increase of demand to raise price. ”

“ Demand and supply-curves are not to be understood merely in terms of brute, physical quantities. They are rather curves expressing economic significances, manifesting psychological forces which lie behind them. ”

“ The proposition is this—A demand for commodities is not a demand for labour.
“The demand for labour depends upon the amount of capital: the demand for commodities simply determines in what direction labour shall be employed. ”

“ The opinion that the price of commodities depends solely on the proportion of supply to demand, or demand to supply, has become almost an axiom in political economy, and has been the source of much error in that science. ”

“ But, secondly: the modern economist, ignoring intrinsic value, and accepting the popular estimate of things as the only ground of his science, has imagined himself to have ascertained the constant laws regulating the relation of this popular demand to its supply; or, at least, to have proved that demand and supply were connected by heavenly balance, over which human foresight had no power. ”

“ The object is to secure that nowhere does expenditure fail to yield a commensurate return. This we express, when we consider a business in its aspect as a consumer, by saying that its consumption of anything will not be carried beyond the point at which the marginal utility exceeds the price it will have to pay. When we consider it as a producer, we say that its production of anything will not be carried beyond the point at which the marginal cost exceeds the price it will obtain. ”

“ They reveal that the equilibrium is established and maintained by the agency of changes in price, and they enable us to lay it down as perhaps the most important thing that can be said about the price of anything that it will tend to be such as will equate demand and supply. ”

“ In other words, the farmer, who is subject directly to the law of supply and demand, may get greatly diminished prices for what he has to sell and be required to pay undiminished prices for what he has to buy. ”

“ Through demand run the forces which regulate production and supply. The function of increased demand is to induce increased supply. But the value concept, and the assumption of a fixed value of money, are needed to preserve this part of the doctrine. Without them we have no way of distinguishing a real increase in demand in the active sense, which does modify the adjustments in production, and alter the proportions of different supplies, from a nominal increase in demand in the active sense, which merely raises a money-price, without affecting supply. ”

“ Of the three possible varieties in the influence of cheapness on demand, which is the more probable—that the demand would be increased more than the cheapness, as much as the cheapness, or less than the cheapness? This depends on the nature of the particular commodity, and on the tastes of purchasers. When the commodity is one in general request, and the fall of its price brings it within reach of a much larger class of incomes than before, the demand is often increased in a greater ratio than the fall of price, and a larger sum of money is on the whole expended in the article. ”