164 WHEAT PRODUCTION IN NEW ZEALAND 



and those affecting the rise and fall of a particular price 

 with respect to that level." 



(ii) Explanation of the Position in the Period. 

 What, then, under normal conditions would be the 

 position with regard to wheat on the occasion of a fall 

 in general prices, such as took place from 1850-73 ? The 

 demand for wheat is comparatively inelastic, and there- 

 fore it would be one of those commodities which would 

 fall in price less than the fall in the general level, 

 and certainly less than the fall in most commodities, for 

 the demand for wheat is less elastic than that for other 

 goods. But the fall in the price of wheat was vastly 

 greater than the fall in general prices, and there must, 

 therefore, have been other influences in operation. Had 

 incomes decreased, then a slight reduction in wheat 

 prices might be expected, a priori. But incomes did not 

 decrease, and furthermore, such a decrease would be 

 manifested in a slackening in demand for commodities 

 other than necessaries, rather than in such commodities 

 as wheat. From the data available, the only sound 

 explanation of this phenomena, apparently contradictory 

 to our a priori reasoning, lies in an increase in supply. 

 Such, indeed, is the true explanation, and the validity 

 of our contention at the outset that increased supply 

 exerted an influence because wheat prices fell more than 

 general prices is established, for normally wheat prices 

 would fall less than the average. 



(iii) Expansion in Production. Stimulated by the 

 high prices of the two decades ending in 1870, agriculture 

 throughout the world had reached a stage of relatively 

 high prosperity. Many new fields of production had 

 attracted the attention of pioneering farmers, and a 

 general movement in favour of developing certain new 

 fields had set in. The United States, India, Argentina, 

 Canada, Australia, New Zealand, all offered profitable 

 fields to the enterprising farmer, and during the ' ' seven- 



