Removing such barriers, so that prices and quantities can adjust to their equilibrium level, will increase the

economy’s social surplus.

Demand and Supply as a Social Adjustment Mechanism

The demand and supply model emphasizes that prices are not set only by demand or only by supply, but by the

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3.5 • Demand, Supply, and Efficiency 77

interaction between the two. In 1890, the famous economist Alfred Marshall wrote that asking whether supply

or demand determined a price was like arguing “whether it is the upper or the under blade of a pair of scissors

that cuts a piece of paper.” The answer is that both blades of the demand and supply scissors are always

involved.

The adjustments of equilibrium price and quantity in a market-oriented economy often occur without much

government direction or oversight. If the coffee crop in Brazil suffers a terrible frost, then the supply curve of
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