nd price; if the price is QN the
amount demanded is ON, and so forth. The terms demand and supply in
the sense, in which I have been using them, of the respective amounts
demanded and supplied are, indeed, strictly meaningless without
reference to some particular price. The reference may sometimes be
implicit; but, whenever there is a chance of ambiguity, it should be
explicitly made.

Sec.3. _Ambiguities of the Expressions, "Increase in Demand," etc_. It is
the more important to be precise upon this point, in that there is a
further possible confusion which we have now to consider. Demand and
supply, as we have seen, are dependent upon price; but equally clearly
they are dependent upon other things as well. Demand depends upon the
needs, tastes and habits of the people, as well as upon the length of
their purse; supply depends upon such things as the cost of production
in the case of commodities. None of these things are constant
factors, all of them are liable to change, and it may well happen that
we shall want to consider in some concrete problem the probable
consequences of such a change. Now the most usual and natural way of
describing such changes in the medium of words is to use the
expression "increase" or "decrease in demand," and "increase" or
"decrease in supply," the same expressions, which we employed before
to describe the consequences of a change in price. This identity of
language conceals a fundamental distinction between the phenomena
described; and to make this distinction plain we cannot do better than
revert to our diagrammatic presentation of the laws.

Figure 2:

Y |
|
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|.
| .
| . _s'_
| . .
D | . .
|** . . * S'
| ** .. . *
| ** . . *
| ** . .. *
| * .. . **
| ** . . **
| ** .. .. **
| * . . *
| ** . . *
| ** .. . **
| ** .. .. **
| ** .. .. **
| ** . ..