Adam Smith's Treatment of Market Prices and Their Relation to «Supply» and «Demand»

Tony Aspromourgos

History of Economic Ideas, 2007, vol. 15, issue 3, 27-57

Abstract: Smith’s approach to market prices is a dynamic conception of price adjustment in response to market imbalance, in terms of deviation of actual prices from normal price. Latter-day demand functions are not part of this conception. Neither are latter- day supply functions – and relations between quantity produced and normal price are highly contingent, depending on competing factors in each particular industry, as well as forces external to particular industries. His analyses of situations in which production is inelastic in relation to effectual demand confirms a tacit supposition of his treatment of market prices: demand-prices are incapable of determinate theoretical expression.

Date: 2007
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