SOME PRICE THEORY 227 



In the case of corn during 52 years, the low price was reached 

 45 times in the six months following harvest, and the high price 

 was reached 19 times in the same six months. 



In the case' of oats for 52 years, the low price was reached 37 

 times in the six months following harvest, and the high price was 

 reached 23 times in the same six months. 



Some Price Theory. The generally accepted principle or 

 theory of price is that supply and demand determine price. This 

 theory generally presupposes the free play of competition. There 

 can be no doubt that supply and demand are the basic factors in 

 determining price. These are the most powerful and most per- 

 manent factors. Supply, however, may be temporarily cornered, 

 or monopolized. Demand may be artificially stimulated. For 

 the consumers' wants are based to a great extent on whims and 

 fancies rather than on any rational consideration. Custom and 

 bargaining power are two very significant factors in price making. 

 That supply and demand are the basic factors in price fixing, 

 however, is shown by our own economic history. Large yields 

 have meant lower prices, and short yields have meant higher prices. 

 Yet it is obvious that only within large limits do supply and 

 demand fix the price. It may be said that supply and demand fix 

 the upper and lower limit of price, and between these limits the 

 actual price is set by other factors. Or, to put it another way, 

 supply and demand stake out a prize ring, and within this ring 

 other factors such as custom and bargaining fight out the actual 

 price. Thus supply and demand may fix the price of the bean 

 crop to the Michigan farmer between four dollars and six dollars 

 a bushel. The actual price may be set at five dollars, especially 

 if the farmers have a strong enough organization to bargain for 

 themselves collectively. The power of the stronger bargainer to 

 influence price is well illustrated by the story of General Grant, 

 as told by himself, when he once bought a twenty-dollar colt for 

 twenty-five dollars. 3 



3 " There was a Mr. Ralston living within a few miles of the village, who 

 owned a colt which I very much wanted. My father had offered twenty dollars 

 for it, but Ralston wanted twenty-five. I was so anxious to have the colt, that 

 after the owner left I begged to be allowed to take him at the price demanded. 

 My father yielded, but said twenty dollars was all the horse was worth, and 

 told me to offer that price; if it was not accepted I was to offer twenty-two 

 dollars and a half, and if that would not get him, to give twenty-five dollars. 

 I at once mounted and went for the colt. When I got to Mr. Ralston 's house, I 

 said to him : ' Papa says I may offer you $20 for the colt, but if you won't take 

 that I am to offer you $22.50, and if you won't take that, to give $25.'. . , I kept 

 the horse till he was four years old, when he went blind, and I sold him for 

 $20." Grant, U. S., Personal Memoirs, 2 vols., New York, 1885, Vol. 1, p. 29. 



