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 difficulty of attainment-is not always the same kind of difficulty, and he arrives at three distinct laws of value, according to three forms or degrees of this difficulty. (1) In the first place, the difficulty may consist in an absolute limitation of the supply, and in this case the corresponding law is said to be the

law of supply and demand. Even on Mill's view the class of commodities which comes under this heading is both large and important, for it includes not only the favourite examples of old pictures, china, &c., but also land, and especially building sites in large cities. Again, it is pointed out that, although comparatively few commodities may be absolutely limited, almost all commodities may be so locally and temporarily, which is really only another way of saying that the law of supply and demand governs all market values; for it is obvious that the supply actually forthcoming or obtainable in a specified time in any market is limited-a point which may be well illustrated by the extreme case of a “corner.” Again, under certain circumstances the supply may be artificially limited, as in the case of monopolies, the classical example being the destruction by the Dutch of some of their spice, in order that the limited quantity might sell for a total higher price. Besides all these important instances of the operation of the law of supply and demand, Mill is compelled also to bring under the same law the wages of labour, the values of the staples of international trade, and some other peculiar cases of value. In fact, step by step he is almost forced to the conclusion, now generally accepted, that the law of supply and demand is the fundamental law of value, of which the other laws are only particular cases. At the outset, however, he appears to consider the two others as of co-ordinate importance. (2) When the difficulty of attainment consists not in the absolute limitation but simply in the fact that the article requires labour and capital to produce it, the normal or natural value is said to be determined by the cost of production. (3) In the last case taken by Mill it is supposed that an article can be increased in quantity, but only at an increasing cost, and in this case the corresponding law of value is the cost of production of that portion which is obtained under the most unfavourable circumstances. These three laws of value may now be examined critically and their mutual relations discussed, for the last two, if not properly of co-ordinate importance with the first, are at any rate wide generalizations.

In order to understand the law of supply and demand, it is best to take separately the general law of demand and the general law of supply, and then effect a combination. Demand must be defined as the quantity of any article demanded at some particular price, it being assumed of course that the bidder of the price can meet his engagements, or, as is sometimes said, that the demand is an effectual demand. It is quite clear that by demand we cannot simply mean desire to possess, because in a sense every one desires everything, and the less the means of payment so much greater in general is the desire. Again, it is obviously necessary to insert the qualifying clause “ at some particular price, ” because, as a rule, with a change in price a different quantity will be demanded. It is, indeed, this variation of quantity demanded, according to variation in price, which gives rise to the statement of the general law of demand, namely: As the price of any article falls, other things remaining the same, the quantity demanded increases, and, conversely, as the price rises the quantity demanded decreases. A very good example of this law is found in the effects of the remission of taxes. The repeal of a tax leads to a fall in price, and the fall in price is accompanied by increased consumption. Conversely, it has often been found that to increase the amount of a tax does not increase the revenue from it, because the demand for the article falls off. The general law of demand is best expressed as by Cournot by saying that the quantity demanded is a function of the price. If we suppose that corresponding to the smallest change in price there is a change in the quantity demanded the law of demand may be illustrated by curves. Marshall has introduced the idea of demand schedules, the quantities demanded being written in one column and the corresponding prices in another. The precise connexion between the price and the quantity demanded differs in different cases, and, strictly speaking, is probably never the same for any two commodities. Every commodity has its own curve or schedule. At the same time, however, commodities may be placed in large classes according to the general character of the variation. The variation of quantity demanded according to price will ultimately rest on the principle of marginal utility explained above. A person. with a limited amount of money to spend will hit the economic mark in the centre if the final utilities of his several purchases are equal. This is a rather technical way of saying that a prudent man will not spend a penny more on any particular thing if the penny spent upon some new object would give him a little greater satisfaction. Reverting to the variations of demand according to price, a contrast will at once be observed between necessaries and luxuries. However much the price rises, so long as people have the means they must consume a certain amount of necessaries, but, however much the price falls, the limit of consumption of bread, for example, must soon be reached. On the other hand, a great fall in price of many luxuries may cause an enormous increase in the demand, whilst a great rise may almost destroy the demand. The rate of charge-the quantity demanded according to the changes in price-is referred to as elasticity of demand. If for a small change in price there is a considerable increase in the quantity demanded, the demand is said to be very elastic. Other characteristics of demand are indicated by the terms direct, derived, compounded, &c, the demand for any one thing being obviously affected by the possible use of substitutes on the one side and on the other by the emergence of other uses. Recent writers, notably Marshall, have given much attention to the development of the law of demand in its various aspects, which has been too much neglected in the Ricardian analysis followed by Mill. A great deal of light might be thrown on many interesting problems in the progress of a nation and of its various component classes, if the laws of demand, or the statistics of consumption according to price, were obtainable.

Turning to the element of supply, this term in a similar way may be defined as the quantity offered for sale at some particular price, and the general law of supply may be stated thus: As the price rises, other things remaining the same, the quantity offered tends to increase, and, conversely, as the price falls the quantity offered tends to diminish. Expressed in this manner, supply appears to be exactly analogous to demand, and the analogy seems to hold good even when we push the analysis up to the utility to the seller as compared with the utility to the buyer. For, as the price rises, the seller will obtain greater utility, and will thus retain less for his own use or will be induced to produce more. On closer inspection, however, the law of supply is found to be not so simple as the law of demand. It would only be so if the seller had simply to compare the relative advantages of exchanging his commodity and of retaining it for his own use, without any further reference to the conditions of, or the motives for, production. In most commodities, however, the determining influence is not the comparative utility of consumption by the owner on the one hand or of the consumption of something else obtained by exchange on the other, but it is rather a comparison of the trouble of producing with the advantage of selling the article when produced. Of course, if we are considering finished products in any market the case is more simple; but even here the question of the relative advantages of present sale and reservation for a future market or distant place must be determined, and then the element of cost of production will again be brought back. The law of supply may be developed on lines corresponding to the law of demand, and we may construct supply schedules on curves 'indicating the relations between the range of prices and the quantities offered at those prices.

Before considering the relation of cost of production to supply, it will be convenient to combine the laws of supply and demand, taking the former in its simplest aspect, and