86 



POLITICAL ECONOMY 



buyers ; it does not in any case determine, or even change, the 

 price at which any one seller chooses to sell or any one buyer 



Horses 

 3 



Supply. 



10 20 30 40 CO 60 pounds sterling. 



FlG. 11. Thornton's Case of three horses for sale at one price, one wanted 

 at same price. 



Price determinate and also quantity sold, by intersection of demand with supply curve, 

 which indicates 3, or any smaller number, for sale at 501. or any higher price. 



chooses to buy. In other words, the law states that the price 

 will be that corresponding to the intersection of the two curves, 

 but in no way determines what those curves will be. Moreover, 

 the law only comes into operation where buyers and sellers can 

 approximately estimate whether, at a given price, the quantity 

 wanted or the quantity for sale is the greater. Competition in 

 open market, or at any form of auction, is one mode in which 

 this estimate may be formed. 



The first and second laws of demand and supply cannot 

 affect those cases where the buyers and sellers have no means of 

 estimating the relation between demand at a price and supply 

 at a price. 



Examples of this occur 



(1) In simple transactions between man and man for one 

 object. 



(2) When sealed tenders are sent in for the supply of a 

 given article. 



(3) When shares in a new company are applied for before 

 any market is found for the shares. 



In the first case, neither demand nor supply curve can be 

 drawn : the price is that at which the buyer can persuade the 

 seller to part with the article. 



