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Societies for the History of Economics <[log in to unmask]>
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Tiziano Raffaelli <[log in to unmask]>
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Sun, 6 Feb 2011 19:05:31 +0100
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Though of course prices and quantities depend on each other, the two ways of
representing the relationship are far from identical. I think it useful to
point out the following remark by Axel Leijonhufvud (Market adjustment
processes, Elgar Companion to Alfred Marshall, pp. 226-7):

Nothing better illustrates our confusions over neoclassical economics than
the universal habit of drawing Walrasian schedules in Marshallian space.
...
Supply-price and demand-price schedules are not loci of optimal points. A
supply-price is the minimum price a producer would accept in order to
continue producing the corresponding quantity. Any higher price would spell
abnormal profit. Similarly, a demand-price is the maximum price the consumer
will be willing to pay. Any price lower than pd(q) will obviously be
preferred. It would imply consumerıs surplus.
The conceptual experiments underlying ps(q) and pd(q) schedules are thus
quite different from those generating the usual qs(p) and qd(p) functions.
Marshallıs schedules are upper and lower boundaries of sets. Consequently,
it is in general not legitimate to treat Œquantity-into-priceı functions as
inverses of Œprice-into-quantity functionsı ... as has frequently been done
in the textbook literature.

Tiziano Raffaelli

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