I’ve been reading about supply and demand and I don’t know if I’m misinterpreting, but it seems like what they’re saying is that when the quantity supplied of something increases, the quantity demanded of that thing decreases. But why would this be case? Let’s say, for example, the quantity demanded is 100. All else equal, why would increasing the quantity supplied from 100 to 200 cause the quantity demanded to drop down?

I mainly hear this in regards to the money supply. They say when the quantity of money increases, people will demand money less. Someone explained it like this: producers won’t be willing to “spend” as many goods and services in exchange for money if the money supply is high and each unit of money is devalued. But this seems circular, because what makes currency devalued is the fact that you can’t exchange it for as many goods and services as you used to, but the reason you can’t exchange it for as many goods and services is because producers aren’t willing to because they think the money is devalued.

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    $\begingroup$ can you please refer to the source where you heard this? $\endgroup$
    – 1muflon1
    Jan 24, 2023 at 18:01

1 Answer 1


When the supply of something is increased it's price (Not demand) will go down, in case of money the 'price' is 'interest rate' of the central bank which goes down. Then banks start lending at lesser interest rate which incetivises investors to invest more.

Other way to increase 'money supply' is Central bank of that country print some money and distribute it among it's people. So that now people have 'more money in their hands' chasing 'same amount of goods as earlier' so what happnes now, the price of everything will go up, because people are willing to pay more since they have got this extra dole from Central bank in their hand. So technically we say More money printing has lead to 'demand pull inflation' because goods and services in economy didn't increase propotionately w.r.t new Goods and services people are demanding it is just that 'extra demand' has 'pulled' the 'price up' effectively causing more inflation(it's examples are like inflation in Zimbambwe, Venezuela etc).


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