§11. Relation to Supply and Demand Curves

In §17 of Chapter X it was shown how supply and demand curves can be derived from the M line and the WEdition: current; Page: [287] lines depicted in Chart 34. Supply and demand curves can equally well be derived from the M line, the O line and the W lines shown in Chart 38. A series of positions of PQ, with different slopes, gives us all the material needed, each slope giving a rate of interest and each horizontal spread between P and Q being the demand for loans (if Q is east of P) or supply of loans (if Q is west of P). The only difference is that P is not now fixed as in the first approximation, but shifts as PQ has different slopes.

It will be noted that the Opportunity line which embodies the technical or production elements in the problem has no more relation to the supply than to the demand, although this runs counter to the common notions that productivity rules one side of the market and time preference the other.

It will also be noted that the map gives us vastly more light on the analysis of interest than do the mere supply and demand curves. But even the map fails to give a complete picture because, in particular, it shows only two years. The truth seems to be that no complete visualization of this difficult problem is possible. The only complete symbolization which seems to be possible is in terms of mathematical formulas as in the next two chapters.

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