ABSTRACT
The leading symptom of the disease called Depression of Trade is a general fall of wholesale prices, accompanied by a less than corresponding fall of retail prices. Whatever may be the ultimate causes of a trade depression, the direct and immediate cause of every fall of price must be a failure of demand to keep pace with supply at the earlier price. So long as those who have goods to sell can sell all these goods at the price they have been getting, they will not lower the price. The direct efficient cause then of any fall of price is an actual condition of over-supply at earlier prices. A very small quantity of over-supply will bring down prices in a business, or in a whole market, provided the competition between the businesses is keen. Where such a fall of prices quickly stimulates demand so that the over-supply is carried off and the rate of demand is equated to the rate of supply at the lower price level, the condition is commonly described as a “tendency to over-supply.” But it is important to bear in mind that in strictness it was not a “tendency” but an actually existing quantity of over-supply which brought down the price.
