Page:Manual of Political Economy.djvu/35

Rh xxiv Contents. Chapter IV. On the Price of Manufactured Commodities. Why the laws of price which apply to agricultural produce do not apply to manufactured produce — An increased demand for a manufactured commodity may economise some of the processes of manufacture and thus diminish the price of a commodity — This illustrated hy Mr. Thompson's invtotion for boat-building — The competition of capital causes a certain average rate of profit to belong to each branch of industry — Hence the price of a commodity must have a constant tendency to be such as to give this particular rate of profit— Conse- quently the price of a manufactured commodity constantly approxi- mates to its cost of production — Cost of production incluaes the profits of the producer — Sudden fluctuations in the demand or supply may cause the price of a commodity to vary c^reatly from its cost of production — These variations in price, though great, are, however, only temporary, since the competition of capital is constantly tending to make the price again equivalent to the cost of production — This illustrated by an example of a sudden demand for rifles — There is' a constant tendency in operation to equalise the demand for a commodity to its supply, both when the price of the commodity is regulated by its cost of production, and when its price is disturbed by sudden fluctuations in the demand and supply p AG ES 345 — 3 56 Chapter V. On Money. Why we discussed the price of commodities before we considered the subject of money — Money provides a medium of exchange, thus obviating barter, and money also serves as a general standard of value — It is not necessary, but it is most convenient, that money should be made of the precious metals — Any substance may be chosen as a general measure or standard of value ; if wheat be thus selected, the price of all commodities must be estimated in wheat — The substance which is chosen as money ought, as far as possible, to possess the following qualities : its value should be uniform ; it should possess an intrinsic value of its own ; it should contain a great value in small bulk — Gold and silver do not vary much in value, because the cost of obtaining these metals is not liable to any creat changes, and, except on rare occasions, the supply of these metals b not suoject to sudden fluctuations— The quantity of gold and silver which is used for other purposes, besides being coined into money, is comparatively small, and therefore the Quantity of gold required for such purposes does not vary greatly — Gold and silver have always possessed an intrinsic value of their own, since no other substances are so well qualified for ornaments ; the brightness of these metals gives them beauty ; they can be long preserved, and their malleability makes them easily worked into artistic forms — These metals have always been scarce— Hence they possess the third requisite for money, since they contain great value in small bulk — Copper money is used for the convenience of making small payments — The inconvenience of a double standard or bi-metallism~if gold and silver are both made a standard of value, then this standard is subject to increased variations— The arrange- Digitized by Google