‘Supply and demand’ is an economic term that may seem straightforward but can cause confusion. This was especially true over two hundred years ago, and it continued to be the case for a long time thereafter. This study investigates the meaning and...
‘Supply and demand’ is an economic term that may seem straightforward but can cause confusion. This was especially true over two hundred years ago, and it continued to be the case for a long time thereafter. This study investigates the meaning and usage of the term in the economic textbooks published in the United States from the 1820s to the 1920s.
After its meaning was stabilized, ‘demand’ settled into a concept connecting consumers’ utility maximization and market prices with the help of the marginal utility theory. Although this process took time, it was relatively smooth. In contrast, ‘supply’ underwent two shifts in meaning and experienced considerable confusion before finally settling into a concept that connects producers’ profit maximization and market prices. This confusion persisted even in textbooks in the 1920s.