164 Professor Whewell on the 



has not been ascertained with any precision, and is probably 

 very different in different cases. When it is necessary to intro- 

 duce it into the calculation, I shall suppose (as in a former Me- 

 moir) that the increase of price is proportionally greater than the 

 diminution of supply. 



The principle of supply and demand effects the market price 

 immediately and at once. If the market price rise, the supply 

 is increased, and the price thus brought down, and in this man- 

 ner the market price gravitates to the natural or remunerating 

 price, which is the standard in the long run. 



Let a capital c produce r units of a commodity, p being the 

 price of one unit. Let b be the return which is annually neces- 

 sary to replace the circulating part of the capital c and the wear 

 and tear of the fixed part : and let 7 be the rate of profit. Then 

 pr = b + yc, is the equation which determines p. 



Also if the supply diminish in the ratio 1 : 1 — y, the price 

 increases in the ratio 1 : \-vey: (e being greater than 1). 



IV. Postulate of Profit. 



6. Profits are entirely regulated by Wages. 



Wages and Price being determined by the two preceding pos- 

 tulates, and the power of production of a given capital being given, 

 the profit left for the capitalist is necessarily determined, being 

 that portion of the surplus return which is not absorbed by 

 wages. In this manner profits appear to be an entirely passive 

 portion of the produce : and when they fall, the capitalist has no 

 remedy in any possibility of raising prices, or otherwise compen- 

 sating his loss. 



This is true so long as we suppose capital confined to one 

 country. When, however, profits fall below a certain point, the 



