SOME DOCTRINES OF POLITICAL ECONOMY. 131 



some luxuries : for instance, when tea or coffee fall to half-price, they may come into use with 

 new and numerous classes of persons, so that the whole sum expended on them may be double 

 what it was. In this case, it is evident that the quantity bought must be four times what it 



was. In this case, m ■ , mx = 1 ; hence m = — 2. 



2 



This may be the case in a smaller degree : if we suppose that a fall to half-price increases 

 the money demand by one-half, we have x = — , mx = - ; whence m = — \. 



If we suppose that a fall to half-price increases the money demand by one quarter, we have 



x = , mx = - ; hence m m . 



2 4 2 



In the last two cases, the quantity bought is, in the former case trebled, in the latter, 



increased in the ratio - . 



2 



In all these cases m is negative. 



13. We must suppose that the above formulas apply also in the cases in which x is 

 negative, or the price falls. Applying this remark to the four classes of conditions A, B, C, D, 

 we see that 



For class A of commodities, (m = 0,) if the price fall, the money demand remains un- 

 altered, and the quantity sold increases inversely as the price. 



For class B, (rn = 1,) if the price fall, the money demand falls in the same proportion ; 

 and the residue is saved by the purchasers for other employments. 



For class C, (m> and < 1,) if the price fall, the money demand falls also, but in a less 



proportion, the quantity sold being increased. Thus, if for any commodity for which m = - , 



4 



the price fall one-half, the money demand will fall one-eighth. If when m = - , the price 



fall one-half, the money demand will fall one-fourth. To produce the former effect the quan- 



7 "- 

 tity supply must increase in the ratio - : to produce the latter the quantity supply must 



. , . 3 



increase in the ratio - . 



2 



Q 



14. If m be very nearly = l, for instance if m = — , and the price fall one-tenth, the 



9 1 



money demand will fall : to produce this effect, an increase in the quantity of — will 



18 

 suffice. If the price fall two-tenths, the money demand will fall — : to produce this effect, an 



increase in the quantity of — will suffice. If the price fall one-half, the money demand will 



9 . 1 . 



fall by — : to produce this effect, an increase in the quantity supplied of — will suffice. 



17—2 



