This paper contrast two viewpoints for analyzing the concepts of supply and demand. The first viewpoint, which dominates most economic thinking, treats supply and demand as rates of flow. For example, supply in economic models tends to be measured by a rate of production, while demand is measured by a flow of consumption or purchases. The second viewpoint sees supply and demand primarily as stock variables or integrations. According to this viewpoint, for example, supply would be measure by the available inventory of a commodity while demand would be measured by a backlog of unfilled orders. The central point of the paper is that stock-variable concepts of supply and demand must be incorporated explicitly in economic models in order to capture the full range of disequilibrium behaviour characteristics of real socio-economic systems. More specifically, the paper shows that consideration of stock-variable measures of supply and demand is necessary to describe the price- and quantity-adjustment mechanisms linking supply and demand; to analyze properly the stability characteristics of an economic systems; to analyze short-run and long-run disequilibrium behaviour; and to assess the desirability of economic policies intended to influence such disequilibrium modes behaviour as economic growth and fluctuation.

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Date created

• 1976

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• Document

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• Creative Commons BY-NC-ND Attribution-NonCommercial-NoDerivs 4.0 International

  
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System Dynamic Society Records

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• This collection is part of the University Archives