The Free Market Center
“Supply and demand curves determine value of money.”
Supply and demand curves affect the value of nothing.
The economists can only construct hypothetical curves after a transaction to depict their speculations about the preference scales of the actors in the market. No one has ever seen a supply or demand curve before a transaction. This applies as much to money as any other commodity.
It is possible to visualize this interaction by drawing two curves, the demand curve and the supply curve, whose intersection shows the price. It is no less possible to express it in mathematical symbols. But it is necessary to comprehend that such pictorial or mathematical modes of representation do not affect the essence of our interpretation and that they do not add a whit to our insight. Furthermore it is important to realize that we do not have any knowledge or experience concerning the shape of such curves. Always, what we know is only market prices-that is, not the curves but only a point which we interpret as the intersection of two hypothetical curves. The drawing of such curves may prove expedient in visualizing the problems for undergraduates. For the real tasks of catallactics they are mere byplay.
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