LAWS OF SUPPLY AND DEMAND 95 



price are determined. The one question which has not been 

 touched being the effect on the market of the power of bargain- 

 ing on the part of sellers, leaving the competition to buyers only. 



I will first discuss this special case, which is that of the 

 labourer who does not bargain as to his wages ; it is also the 

 case of a forced sale, as at a bankruptcy, and of any other sale 

 by auction without a reserved price. The curves in Fig. 7 re- 

 present this case. The power of bargaining, or, in other words, 

 of reserving some of the goods for sale, may lower the supply 

 curve below the straight line, and thus raise the price, diminish- 

 ing the quantity bought ; but it must be remembered that the 

 demand curve is no fixed line depending on some numerical 

 quantity or material weight, but represents a certain mental 

 state. Now, it is observed that the knowledge that goods must 

 be sold, that in fact there is no reserved price, does tend to 

 diminish the desire for these goods quite independently of the 

 knowledge of the mere material quantity in the market. The 

 knowledge that the bankruptcy of some firm will necessitate the 

 immediate sale of a stock, at once lowers the demand curve 

 while it raises the supply, and by a double action lowers the 

 price. This is often described as the effect of a sudden increase 

 of supply ; so it is, but the words, at a price, should be added, 

 and whenever we take away the power of bargaining, or of 

 fixing a reserved price, we virtually increase the supply at a 

 price, putting the sellers into the position of bankrupts whose 

 effects must be realised. 



Now the legitimate action of trade-unions is to enable the 

 labourer to set a reserved price on his merchandise, precisely as 

 any other dealer in goods can, and to deprive him of this power 

 is to put him to the same disadvantage as the bankrupt sales- 

 man. Each labourer who has a reserve fund may bargain for 

 himself, and concerted action is not theoretically necessary 

 to allow of bargaining ; practically the individual labourer 

 seldom bargains, but, acting in concert with others, he can and 

 does set a reserved price on his labour, and gets precisely the 

 advantage that any other salesman would. Probably the quantity 

 of labour or any other material bought under these circumstances 

 will be less than when no reserved price is fixed ; but this need 

 not be so. and even if it be, it may be more advantageous to the 



