The First Law of Economics

Mr. Reinach is a financial consultant, formerly a member of a New York Stock Exchange firm.

The economic facts of life are many. But the grandfather of them all is the law of demand and supply. If this one law alone were thoroughly understood, it is highly improbable that government interference in the market place would ever again be tolerated. Lets see how this law works in your everyday life:

You own at least one pair of shoes, probably several. Your least expensive pair of shoes may have cost you as little as $5.00. This least expensive pair,  the one you can most easily afford will serve to help clarify the law of demand and supply.

Had this pair been priced at $1.00 or an even more ridiculously low figure, it is quite probable that you would have bought several pairs in anticipation of future needs, or just as a luxury. But had this pair been priced at some exorbitant price like $2,000, you would either be going shoeless, be reduced to making your own shoes, or be keeping your feet protected and comfortable in some other way. At $2,000 per pair, even the wealthy mans wardrobe wouldnt contain many shoes.

Now between $1.00 and $2,000, there is a price at which you will own several pairs, a price at which you will own only one pair, and a price at which you will own no shoes at all. Working down from the top figure of $2,000, lets say that the retailer starts reducing his price a penny at a timeand lets also assume that at each new price you are unable to predict any further reductions. Your active interest in shoes may not be aroused until he gets his price down to somewhere under $100. But at some price under $100, you will say to yourself: Well, I guess Id better buy one pair, anyway.

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