THE PRICE OF WHEAT 235 



Oth'<5r causes which effect a variation in the demand for wheat 

 are: (1) War, which causes a variation in the foreign demand; 

 (2) the standard of living is rising, and this increases the de- 

 mand, especially in rye consuming countries; (3) commerce and 

 the introduction of a foreign civilization may increase the con- 

 sumption of wheat, as in some of the Oriental countries. The 

 condition that wheat is the staple food of man in the nations 

 of the highest civilization and of the greatest economic 

 strength tends to keep the demand for wheat firm, while the 

 fact that the world supply of wheat comes from all quarters of 

 the globe tends to prevent acute scarcity of the general supply. 

 The demand for breadstuffs taken collectively is comparatively 

 inelastic. 



The Reactions of Price. If the price of wheat falls so low 

 that its production becomes unprofitable there will be a ten- 

 dency for capital to become engaged in the production of other 

 crops which yield a larger return. On the other hand, there 

 are many substitutes for wheat which are at the command of 

 the consumer, and which he uses when the price of wheat rises 

 too high. This lessens the demand for wheat, lowers its price, 

 and decreases its production. Thus the forces of supply and 

 demand always seek equilibrium. To say that the producer 

 must get what he can for his product is not sufficient. If he 

 does not get what is economically just, on the whole and in the 

 long run, then he must stop producing, and his capital will seek 

 other channels until it again receives its due return in this. 

 The value of wheat to the consumer must on an average be 

 high enough to cover the cost of production and the expense 

 of distribution. As a general rule, the consumer is com- 

 paratively more free to delay purchasing than the producer is 

 to delay marketing, and hence the interest of the latter is the 

 more critical one. It has been said that price is "determined 

 normally by the net cost of producing an adequate supply." 

 It is true that the price of wheat cannot normally be below 

 the cost of production. It is no less true, however, that it 

 cannot be above what the consumer is willing and able to pay. 

 Cost of production and value to consumer are respectively the 

 minimum and maximum limits of price, and they are botn just 

 as essential in determining price as the numerator and 

 1 Industrial Commission. 6:32. 



