It can readily be seen that no other price could be maintained.  For suppose the price to be less than O_m_, suppose it to be O_k_, then, at this price, ON (or kq) will be the amount supplied, and kr the amount demanded.  The demand will thus exceed the supply, and the price will tend to rise, i.e. to move upwards towards O_m_.  Similarly if we suppose the price to be O_l_, which is larger than O_m_, the supply (lR) will exceed the demand (lQ) and the price will fall downwards towards O_m_.  Thus, again, we have deduced Law III from Laws I and II with the form and precision of a proposition in Euclid.  Now, when once the eye has become familiar with this diagram, it ought to be impossible for the mind to lose even momentarily its grip on the fact that demand and supply are both dependent upon price.  For these curves do not represent any particular amounts; they represent a series of relations between amount and 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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d|
|.
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|  .                                         s’
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D |    .                                     .
|**   .                                   .    * S’
| **   ..                                .    *
|  **    .                               .   *
|   **    .                            ..   *
|     *    ..                         .    **