DIFFICULT MARX PAPER

Difficult Marx

Difficult Marx Paper

Introduction

Because of their importance to the development of financial idea, an appreciation of the concepts of supply and demand is essential to the understanding of financial theory. This article seeks to explain their significance in non-technical terms and to supply a simple introduction to the law of supply and demand, with links to more detailed explanations.

The proposition that prices are very resolute by supply and demand is so familiar that it seems like a statement of the obvious. In fact, it was not generally acknowledged, even by eminent intellectuals such as Adam Smith, John Stuart Mill and David Ricardo, until the idea was popularised by Alfred Marshall towards the end of the nineteenth century. Since then there has been general acceptance of the proposition that demand rises in response to a decrease in cost, that supply rises in response to an increase in cost, and that cost somehow settles to a grade where demand is equal to supply. That proposition has arrive to be been termed "the law of supply and demand" and is often considered to be as solidly established as the law of gravity. In fact it is what Marshall termed "a statement of a tendency", counting upon particular premises about human behaviour, and some economists have questioned its logical consistency. It has regardless endured in general use as a robust declaration that reflects prevalent experience. In economics, it has served as a device that has been used in the construction of other theories, and it has generated a terminology that has been broadly used in discussions among economists.

The period "equilibrium" is applied by economists to the situation in which supply is equal to demand - by analogy with the state of a physical body which is at rest because ...