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Appendix 4 - Demand and Supply - The Relationship A theme repeated often in this thesis is the one that states that natural laws are invisible until given visibility by images or graphics that are the domain of mathematics. Figure A4-1, relationship of demand and supply, is most representative of the meaning of that theme. The particular branch of mathematics represented here is 'geometry', from the Greek 'geo' meaning the 'earth' and 'metrein' meaning 'to measure'. Appearance of this particular graphic seems limited to 'economic' texts; that is, texts that deal with that all encompassing subject called 'economics'. This graphic should be included and discussed in all high school 'geometry' classes, to give that subject (geometry) real meaning, application and life to the young minds that are more than capable of understanding it in the earliest of their formative years. The version shown here is simply a square or a rectangle (whatever you prefer) with criss-crossing diagonal lines. No useful purposes are served by attempting to affix specific numbers to represent specific units of quantity or cost or price of a specific product. Affixing specific numbers, to represent specific units of quantity, or cost, or price, of a specific product, as a result of the movement of the diagonal 'demand' line within the square or rectangle (whatever you prefer), serves only to introduce unnecessary complexity to the import and understanding of the natural forces of the human demand 'variable' and the human ablity to meet, or otherwise satisfy, that most variable of variables - human demand - a natural and variable human demand that is not restricted to material product. Everything that needs to be said about this particular 'natural law' is provided in the descriptions of all the related parts and relationships - descriptions provided within this illustration of this particular natural law. The mythical perception and definition of inflation is simply an increase in prices. The cause of true inflation is: increasing the national money supply in excess of the natural growth rate of the total national population headcount. True and deliberate inflation causes the demand and supply box to increase in the vertical dimension, causing the diagonal lines to be stretched upward, causing the 'equilibrium' price to move upward. Increase of interest rates by the Fed does not stop the inevitable increase in price; increase in interest rates simply increases the liability of all business structures and individuals and only delays for a short time the inevitable and unstoppable increase of price. You are invited here to test this observation with your own knowledge and experience. Comments or questions are welcome. Return to Positions On Other Issues See Technical Appendices and Illustrations Return to 'Home Page' |
