90 POLITICAL ECONOMY 



to that of the first. The ordinates of the demand curve repre- 

 sent the average quantity wanted, say in a year, at the several 

 prices. This curve can only be approximately estimated before- 

 hand from past experience, and is subject to no one general law 

 for all materials. For each material experience may, however, 

 show several points of great importance in the curve ; as, for 

 instance, whether the curve be nearly horizontal the total demand 

 being little affected by price or whether it is sharply inclined, 

 showing that the demand increases rapidly as price is lowered, 

 and vice versa. Statistics collected over several years might also 

 show whether the general character of the curve was convex or 

 concave to the base, and at what rate approximately the average 

 height of the curve increased year by year. Thus, for many 

 materials, approximately accurate average yearly demand curves 

 might be determined by the collection of statistics. 



80 Shillings. 



FIG. 12. Third Law of Supply and Demand. 



The ordinates of the demand curve are the average yearly quantities of the material 



required at each price. 

 The ordinates of the supply curve are the average quantities which at each price would 



be manufactured if there were sufficient demand to absorb that quantity in the year. 

 The price corresponding to each point in the supply curve is the cost of production t,f 



the article in that quantity, including in the words cost of production, sufficient 



profit to labour and capital to induce the production of that quantity. 

 In other words, the price is the lowest price at which that given quantity will be 



produced. 



The ordinates of the average supply curve represent the 

 quantity which will be produced in a year at each price. This 

 curve will also vary for all materials. In some it will have the 

 character of curve 1 in Fig. 12 terminating almost abruptly 



