But let us go back to the laws themselves, and probe them and dissect them, and turn them this way and that, so that we may perceive their full content, and grasp it firmly in our minds.  The third law implies a prevailing tendency for demand to be equal to supply.  This tendency, as was suggested in Chapter I, can be verified by anyone from his experience and observation (provided he is a reasonable person, and not the tiresome kind who would dispute the law of gravitation because he sees that a feather falls to the ground more slowly than a stone).  But it can also be deduced as a corollary from the two preceding laws; and to regard it in this way will help us to appreciate its significance.  Start, for instance, by supposing that demand is in excess of supply.  Then the price will tend to rise.  After the price has risen, the supply will become larger, while the demand will fall away.  The excess of demand with which we started will thus clearly be diminished.  But if there remains any portion of this excess, the same reactions will continue; the price will rise further, and for the same reason; demand will be further checked and supply further stimulated.  In other words, these forces must persist until the entire excess of demand over supply is eliminated.  If we start by supposing supply to exceed demand, the converse chain of sequences will operate.  Now these very simple steps of reasoning illuminate the nature of the normal equilibrium of demand and supply.  They reveal that the equilibrium is established and maintained by the agency of changes in price, and they enable us to lay it down as perhaps the most important thing that can be said about the price of anything that it will tend to be such as will equate demand and supply.  But that is not all that they reveal.  They reveal also the extreme dependence of both demand and supply upon price.

Now this is a fact which it is most important to realize vividly.  It is apt to be obscured by customary modes of speech.  In ordinary times the prices of most commodities and services do not change by very much, unless indeed over a long period of years; the amounts demanded and supplied may therefore seem to maintain a fairly constant level; and we may be tempted to speak of Great Britain producing so many million tons of coal, or America consuming so many millions of motor-cars per annum, almost as though these quantities were independent of price considerations.  But we should never forget that there is no service or commodity produced by man, however essential it may seem, the demand for or the supply of which might not be reduced to nothing, if the price were sufficiently raised on the one hand, or lowered on the other.  How easy it is sometimes to forget this simple truth may be seen from the mistake so commonly made of supposing, because the peoples of Central Europe were left, on the cessation of the war, starving and destitute of the means of life and the materials of work, that they must necessarily become heavy purchasers of imported goods; without pausing to consider whether the prices were such as they could afford to pay.