SOME DOCTRINES OF POLITICAL ECONOMY. 147 



In this case, the two commodities (C) and (Z>) (35) will no longer exchange at precisely 

 the same rate in the two countries. The commodity (D) which has to be carried to England, 

 will be dearer there by its cost of carriage ; and (C) will be dearer in Germany by the cost of 

 carrying it from England. 



Suppose that the cost of carrying a unit C to Germany is a fraction u of the price 

 of C, and the cost of bringing a unit D to England is a fraction U of the price of D- 

 The price of C in Germany is P'D, if D be the price of a unit of (Z>). Therefore the 



PD 



price of a unit C in England is . Also the price of a unit D in England isD(l + U). 



1 + u 



But the price of C in England is to the price of D as 1 to p. Therefore 

 Pp'D 



i + u 



= D (1 + U) and P'p m (1 + U) (l + y). 



This equation takes the place of the equation of the uniformity of international prices, 

 P'p' = 1, (36) in the former investigation. 



62. If, as before, p' - P (l - *), P - P (l - X), and if we put 



(1 + U) (1 + u) 

 Pp 



we shall have, as before, (39) the equations, 



1 _ n (i _ M k') 



l-k\ 



m-n(l - M ) 



(1 - X) (l - a?) = 1 - k'. 



63. There will be no export of C, and import of D, except 



(1 + U)(l+u) 



Pp 



<1. 



13 1 



Thus, if, as before, (40), — - = - , but u and U each = - , 



Pp 4 6 



(1 + U) (1 + u) 49 



Pp " 48 ' 



and there will be no importation. 



64. This may be illustrated by a numerical example. Let the commodities be cloth 

 and linen. 



Since u = - , U = - , for each 6 yards of C (cloth) manufactured in England, one yard 



must be manufactured, or the cost of one yard supplied, to provide for the expense of carriage 

 to Germany : that is, the cost of 7 yards must be incurred to take 6 to Germany. In like 

 manner the cost of 7 yards of D (linen) must be provided in order to take 6 to England. 



Hence 98 (= 2 x 7 x 7) yards of cloth in England which is (on our former supposition) 

 equivalent to 147 (=3x7x7) yards of linen, being exported to Germany, is reduced to 

 84 (= 2 x 6 x 7) yards by the expense of carriage. And this in Germany exchanges for 



19—2 



