The famous supply and demand graph has been drawn sideways since 1890
Every economics student meets the crossing lines of supply and demand, yet the picture breaks a basic habit of mathematics. Price, the thing that drives everything else, sits on the vertical axis where the dependent variable normally goes. Blame Alfred Marshall, whose choice stuck, along with a few odd goods that refuse to behave.
The model itself is simple. In a perfectly competitive market the price of a good drifts until buyers want exactly as much as sellers offer, the market-clearing point where the two curves meet. Supply tracks marginal cost, since firms keep producing while an extra unit earns more than it costs. Demand tracks marginal utility, since shoppers keep buying while the next unit is worth its price to them. A jump in raw material costs shifts supply leftward; a rise in demand pushes its curve right, lifting both price and quantity.
The drawings arrived in stages. Augustin Cournot sketched demand curves in an 1838 treatise on the mathematics of wealth, and Fleeming Jenkin added supply curves in 1870. Marshall's Principles of Economics popularised both in 1890 and put price on the vertical axis, even though modern convention would place it horizontally as the independent variable. The quirk remains standard.
Some goods defy the downward-sloping demand curve. Veblen goods become more desirable as they get pricier because they signal status or fashion. Giffen goods are staples that eat up much of a poor household's budget; when their price rises, families can no longer afford better food and end up buying more of the staple. Potatoes in Ireland are the classic illustration.
The model also has limits. It assumes nobody can move the price alone, so a firm or buyer with market power needs a different framework, such as oligopoly or monopsony. More unsettling is the Sonnenschein-Mantel-Debreu theorem, which shows that curves for a whole economy need not inherit the tidy shape of individual choices. The law of demand may fail at that scale, and there is no guarantee that competitive economies settle into a single stable balance.
Source: Supply and demand
