Tuesday, June 28, 2005

Deja unvu 

Caroline Baum, maybe the best economics reporter you haven't heard of:
If I could pick one graph in the entire field of economics to illustrate my columns, be they on the Federal Reserve, the yield curve or oil, it would be the supply and demand curves.

I would draw a vertical axis marked P (price) and a horizontal axis marked Q (quantity). Then I'd draw a downward- sloping demand curve and an upward-sloping supply curve. I'd mark the point where they intersect ``E,'' for equilibrium: Supply and demand are in balance.

Economics textbooks are very good at explaining this stuff. Really. Economists are equally good at forgetting it.
Mahalanobis has an illustration. Baum is trying to figure out why people who thought $50 oil would take some of the growth out of the economy are now saying demand will be strong even at $60. RTWT.