CAN "PRICE" MAKE "SUPPLY AND 

 DEMAND"? 



IS SATISFIED farmers and city consumers have been told 

 L / often that "supply and demand" makes the price. Econo- 

 mists have backed up the Board of Trade people and the packers 

 in making this assertion. 



But is it not almost equally true to say that "price" makes 

 the "supply and demand"? Is it not possible to set a price which, 

 as can be demonstrated mathematically, is out of line with the 

 present supply and demand, and thru this price to create new and 

 unexpected supply-and-demand conditions? 



It is conceivable, for example^ that oleomargarine might be 

 sold for several years at a price below that warranted by supply 

 and demand and equally below a price warranted by cost of pro- 

 duction. It is conceivable that the abnormally low price, without 

 reducing the supply, would increase the demand and result in the 

 formation of the oleomargarine habit among millions of people. 

 And it is equally conceivable that later on the price of oleomar- 

 garine might be increased more nearly to a parity with butter, and 

 that the oleomargarine eating public might continue the oleomar 

 garine, even tho it was underselling butter by only 10 cents a 

 pound, instead of the 15 cents a pound differential which was ex- 

 isting when the habit was formed. 



A low price may be used to create a demand, which will con- 

 tinue even after the low price no longer exists. In like manner, a 

 low price may be used to curtail the supply of the competing 

 article. In the illustration, an artificially low price for oleomar- 

 garine might reduce the demand for butter, thereby reducing the 

 supply, and increase the demand for oleomargarine, and this situ- 

 ation of a reduced supply of butter and an increased supply of 

 oleomargarine might continue, even tho the price of oleomargarine 

 were later raised to its customary relationship with butter. Price 

 may act as a cause and "supply and demand" may be a result. 



In open, competitive markets, "supply and demand" generally 

 comes first and price follows after. Before the war, for instance, 

 the dominating factor in the corn market was the supply of corn, 

 and during the months of July and August, when the new corn 

 crop was being made, the price of corn varied with almost mathe- 

 matical accuracy with the rainfall and temperature which were 

 making the new corn crop. The demand for corn was a fairly 



