Macro econ question??
Answer:
depends on which school of thought you're using, and the period you're looking at.
the classical ones suggest that SUPPLY will take care of demand. ultimately, market works in such a way that there is an "invisible hand" at work, that pushes quantity and prices to equilibrium when demand or supply is higher or lower than that.
for example, when the demand is higher than supply(so price is below equilibrium), consumers are willing to pay higher prices for the product, thus bringing up the price back to normal, until the equilibrium point where the price gets so high, some consumers forgo the consumption. the reverse is true as well.
Then came along Keynes, who observed during the Great Depression that this doesnt always happen, because throughout that period economy was bad and unemployment didnt improve, thus suggesting that the economy doesnt always adjust back, but that it requires government intervention.
he viewed supply as a horizontal line along the graph, and DEMAND as a downwards sloping line. thus, graphically, one can see that an increase in the demand causes the economy to improve, and in a sense, suggests that supply will be met by the demand.
the late Mr. Keynes once said, "in the long run we are all dead", thus suggesting that we cannot afford to wait for the economy to move by itself, but that it requires our actions and government intervention to control the demand.
also, its mainly the period you're looking at which will determine which is more relevant to your case.
Well, assume the economy is one person. This person trades his labor for bread on a farm. In this case, he supplies all the labor he wants to get the bread he wants. Therefore supply equals to demand.
Now assume this person is an economist and cannot make bread. He will starve to death. This is because the technology does not exist to make him productive enough. Supply will not equal demand.
Assume that I don't know about the technology and I produce too much food, more than I demand. Or maybe I don't make enough. Again, supply will not equal demand, but if this were a market with lots of people I might expect prices to adjust so that supply equals demand. But, certainly there will temporary shortages and surpluses in the short run where supply does not equal demand. We might choose to call these recessions.
What if, instead of investing in the farm by sharpening it's tools, I put aside food in a warehouse? If I hoard food, then supply and demand will not be equal.
So you see, there are exceptions when supply and demand might fail, given assumptions about technology, information and market adjustment. I prefer to use this language than the language you use (something creating something else), because that language is confusing.
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