140 WHEAT PRODUCTION IN NEW ZEALAND 



day in any of the great world markets. Temporary 

 disturbances are due for the most part to factors oper- 

 ating from the supply side, for the element of risk in the 

 production of wheat is great, due chiefly to the large part 

 which climatic conditions play in the yield and in a less 

 degree to transportation difficulties. But the fact that 

 the world supply of wheat comes from all quarters of 

 the globe tends to prevent acute scarcity of the general 

 supply, a temporary diminution in production in one 

 area being counteracted by abundance from some other. 

 Nevertheless, it must be observed that each of these 

 factors will have a temporary effect on price. 



On the demand side factors do not exert such an 

 immediate influence. The condition that wheat is the 

 staple food in the nations of the highest civilisation and 

 of the greatest economic strength tends to keep the 

 demand for wheat firm. In other words, the demand for 

 wheat is characterised by its inelasticity. 



This treatment so far offers an apparent contradiction 

 to the principle, elaborated in most treatises on eco- 

 nomics, that demand plays a predominating part in the 

 determination of market price, while in normal price 

 it is chiefly factors on the supply side which exert a 

 decisive influence.* On the whole the contradiction is 

 only apparent. The activity of buyers varies from day 

 to day, and it is this activity which settles price 

 from day to day. How then, as was stated above, can 

 temporary fluctuations be due for the most part to 

 factors operating from the supply side? 



The demand for the products of wheat is so constant 

 that buyers would make their purchases with a high 

 degree of regularity were it not for temporary dis- 

 turbances in supply. The activity of buyers on any 

 one day is stimulated by news of the failure of certain 



"Marshall's " Principles of Economics." Pages 372-8. 



