18 POLITICAL ECONOMY 



We assert that the number of things bought and sold may 

 remain perfectly constant and yet a considerable change of price 

 take place. Not only may the number remain equal at very 

 different prices this no one denies ; but a thousand transactions 

 may take place this year at one price and a thousand transactions 

 may take place next year at double the price without any varia- 

 tion whatever having taken place in the demand or supply, as 

 measured by the number of goods supplied and sold. What is 

 necessary for this result is simply that while a disinclination to 

 supply the article at the old price arises, an inclination on the 

 part of purchasers to buy at a higher price shall also arise. So 

 long as the total desire for the article, and reluctance or readiness 

 to sell it, are unaltered, the price of the commodity remains 

 fixed. Competition between both buyers and purchasers brings 

 back the price to this fixed amount whenever any accidental 

 deviation occurs. This is the law of demand and supply, as 

 usually understood. The price is no more fixed by competition 

 than a weight is fixed by a balance and scales ; but the balance 

 and scales serve to measure weights, and competition brings the 

 price to the amount fixed by other considerations, which, in the 

 case of a limited article, may be infinite in number, including 



price diminishing the second member would be to raise the first. The in- 

 creased quantity wanted would bring back x to its true market value. Again, 

 suppose that the desire to possess the goods increases by an increase of A ; 

 if S remains constant then x must rise to maintain our equation. If the 

 readiness to sell increases by an increase of B, x must fall. Our equation 

 thus expresses every relation between value, demand, and supply, which Mill 

 states as expressing the law of value with respect to all commodities not 

 susceptible of being multiplied at pleasure. But there is nothing in this law 

 to prevent A,f, F, and B from varying any day or any hour, from motives of 

 the most opposite kind. 



When the quantity demanded at a fixed price increases, A is increased. If 

 B varies at the same time to a corresponding extent, we may have x the same 

 as before, but a brisk trade instead of a slow one. If, on the other hand, B 

 diminishes while A is constant, the price will rise while the number of 

 transactions will become more limited, but if A rises while B falls, we may 

 have a new and higher value of x, with a constant number of transactions ; 

 this is the conclusion to which we especially wish to draw attention. A 

 diminished supply conveys to the minds of most persons the idea of absolutely 

 fewer things for sale ; but when an exact definition is sought of the number 

 of things for sale, the idea of price is necessarily added ; the things must be 

 for sale at a given price, and an increase in the price at which a given num- 

 ber will be supplied produces many of the effects due to a diminution in the 

 number supplied at a constant price. 





