Supply-situation, represented by the supply-curve, and demand-situation, represented by the demand-curve, are conceived of as antithetical and independent causal forces, whose equilibrium determines both "supply and demand" (in the sense of quantities supplied and demanded) and price. Mill's doctrine that supply and demand determine price gets out of the circle that demand (amount demanded) is itself dependent on price, only by making both demand in this sense and price _results_, rather than causes, and by putting the causation back into the more complex factors which I call "supply-situation" and "demand-situation." The two independent causes, then, are summed up in the supply-curve and the demand-curve. But, first, these curves are expressed in money. And second, a change in the value of money would affect _both_ of them proportionately. But a theory which is concerned with supply and demand as independent and antithetical must abstract from factors which give them a _common_ movement, without modifying their _relation_ to each other. A change in the value of money would lead the supply-curve to move to the right, and the demand-curve to move to the left, the change in each being proportionate, and the amount supplied, and amount demanded, would remain unchanged. Changes in the value of money must, therefore, be abstracted from. Again, we must precise the notion of an _increase_ in demand, or of supply. Increase in demand may mean mere increase in amount demanded, consequent upon a lower price, consequent, _i. e._, upon a lowering of the supply schedule. In this sense, increase in demand is a passive fact, a result rather than a cause. On the other hand, if the increase in demand is an increase in the amount demanded at the _same_ price, if it means a change in the demand-situation, represented by the moving to the right of the demand-curve, we have a causal factor in increase in demand, a factor which raises the price and compels new supply to come into the market. We may distinguish these two meanings as increase in demand in the active and in the passive senses. _Mutatis mutandis_, we may speak of increase of supply in the active and passive senses. These distinctions have been made before, but it has not been clearly seen that these distinctions, and the connected doctrines, involve the assumption of a fixed value of money. But consider: it is the current doctrine that increase in demand in the active sense, the demanding of a greater amount at the same price, the moving of the demand-curve to the right, not only raises the price, but also tends to _increase the supply_. But this is true only if the _cause_ of the increase in demand is not a cause which simultaneously works on supply, neutralizing that tendency. If the increase in amount demanded at a given price be due to a lowered value of money, then the same lowered value of money will reduce the supply available at that price _pro tanto_, and the new