THE “QUANTITY THEORY” 67 
increased when we only mean that people are taking 
more of it because they can get it cheaper. It is 
obvious, however, that it is not this kind of increase 
of demand that we have in mind when we discuss 
the effect of increase of demand upon values. We 
could not say in the same breath that increase of 
demand for houses raises the value of houses, and 
that a fall in the value of houses causes an increase 
of demand for them. We can, however, say in the 
same breath, that increase of demand raises the value 
of houses, and that the fall of value extends the 
demand for them (or, vice versa, a rise of value 
contracts the demand). No more in the case of 
currency than in any other case does the increase of 
supply defeat itself by causing increase of demand. 
It only extends demand, inducing people to hold more 
currency because the fall of value makes it possible 
to hold larger amounts with equal sacrifice and 
necessary to hold larger amounts to secure equal 
convenience. 
Granted that the Quantity Theory is right in 
asserting that increase of quantity, demand remaining 
the same, will raise prices and diminish the value of 
currency, the ne-* question is *“ How much will any 
given increas: > quantity diminish the value of 
the currenc? Tis, of course, depends on what 
is now called * / economists, following Marshall, the 
“elasticity of the demand” for currency. The 
demand for a thing is regarded as being the more 
elastic the more it will extend on any given fall of 
price, or, to put the same thing in what for our 
present purpose is a more useful way, the less 
difference any given addition to the amount put on 
the market wi" make to the price, the more elastic 
is the demand. _f the demand were such that an 
increase of supply would always cause an exactly 
reciprocal fall in the value of the article, the elasticity