78 POLITICAL ECONOMY 



PROP. 1. In a given market, at a given time, the market price 

 of the commodity will be that at which the supply and demand 

 curves cut. 



This price is the price at which the supply and demand are 

 equal. 



Corollary A. At this price a greater quantity of the com- 

 modity will change hands than at any other price. 



In practice, the supply and demand curves are unknown, 

 but the price at which supply and demand are equal is ascer- 

 tained approximately by competition in this wise : 



If some sellers offer their wares below the theoretical price, 

 so many buyers present themselves, that the other sellers, not 

 being afraid of having goods left on their hands, raise the price. 

 If some sellers begin by offering their wares above the theo- 

 retical price, so few buyers present themselves, that others, fear- 

 ing to have their goods left on their hands, undersell them. 



If some buyers offer less than the theoretical price, so few 

 sellers are found that the same or other buyers raise their 

 offers. 



If some buyers offer more than the theoretical price, so 

 many sellers are found that the other buyers reduce their offers. 

 The same effect is produced whether the buyers bid or sellers 

 proffer first. The excess or defect of the supply over the 

 demand at a price is inferred from the briskness of the sales, 

 and is independent of the particular form in which transactions 

 may take place. 



Thus the market price, as determined by the first law of 

 supply and demand, is ascertained by competition. 



The law thus stated assumes that each man knows his own 

 mind, that is to say,, how much of his commodity he will then 

 and there sell or buy at each price, and that the condition of his 

 mind shall not vary. 



If this be granted, then the market price will not be changed 

 by the sales. The base line, as each quarter of wheat is sold, 

 will then in our figures gradually ascend, until, when 800 

 quarters have been sold, it will have reached the position 

 shown in Fig. 2, when no further sales will take place, but the 

 market price will, as before, be 505., any increase finding sellers, 

 any decrease buyers. 



