LAWS OF SUPPLY AND DEMAND 91 



at a given price, and shooting very rapidly upwards, so as to be 

 nearly vertical ; this characterises the case of articles which, at 

 a given price, can be produced in almost unlimited quantities, 

 there being no material limit to their production in amounts 

 immensely superior to the demand. Toys, for instance, are 

 articles of this kind, requiring little capital, moderate skill, and 

 common raw materials. 



Most supply curves will have the character of curve 2 in 

 Fig. 12. In these the cost of production will gradually increase 

 with the quantity produced, owing to the limitation of labour, 

 of capital, and of raw material. 



The cost of production, as it must be understood in the third 

 law of demand and supply, is obviously no one fixed cost constant 

 for all quantities, and the supply curve determined by the cost 

 of production may vary just as much as the supply curve in a 



U 20 30 40 50 60 70 80 90 



Shillings. 



FIG. 13. Article dearer to produce in small quantities than in large. 



Articles produced at the rate of less than \\ millions per annum, cost so much to pro- 

 duce that the quantities indicated by first curve only are produced at each price 

 Sale 750,000, price 58*. 



If made in wholesale quantities exceeding 5 millions, the cost of production is shown 

 by second curve. Seven millions may then be sold at 3fts. 



The demand curve might have fallen below 5 millions at 27*^ when the price will be 

 determined by the first supply curve only ; or, while above 6 millions at 27t^ the 

 demand curve might fall short of the price of 55*., when the lower price would be 

 alone possible. 



given market at a given time. The cost of production does not 

 mean the cost at which an article can be produced if unlimited 

 numbers of labourers could be found who would be content with 

 given wages, and if capitalists would apply unlimited capital at 



