I io POLITICAL ECONOMY 



measurement, and he bases his curve, not on the varying 

 estimates of value set by different individuals each on what he 

 has or what he wants, but on the varying utility to each indi- 

 vidual of each increment of goods. The above estimate of the 

 gain due to trade, deduced from the demand and supply curves 

 as originally drawn in my Recess Studies article is, I believe, 

 novel, and gives a numerical estimate in money of the value of 

 any given trade, which might be approximately determined by 

 observing the effect of a change of prices on the trade ; the 

 curves throughout their whole lengths could certainly not, in 

 most cases, be determined by experiment, but statistics gathered 

 through a few years would show approximately the steepness of 

 each curve near the market price, and this is the most important 

 information. 



A steep supply curve and a horizontal demand curve indicate 

 that the buyers reap the chief benefit of the trade. The sellers, 

 if producers, may, however, be making important profits as 

 capitalists and labourers. 



A steep demand curve and a level supply curve indicate 

 that the suppliers are chiefly benefited by the trade ; the com- 

 munity or body which is most ready to abandon the trade if the 

 price increases a little, benefits least by the trade. 



When the traders are producers and consumers, the benefits 

 estimated in this way as due to the trade are not the only benefits 

 reaped by the community from the manufacture. 



In this case, what is termed the supply curve depends on the 

 cost of production of the article, including that interest on 

 capital and that remuneration for skilled superintendence which 

 is necessary to induce the producer to employ his capital and 

 skill in that way. The cost of production increases generally 

 with the quantity of the article produced, otherwise the supply 

 curve would be a straight vertical line ; but as a matter of fact, 

 to produce an increase of production a rise of price is necessary, 

 indicating that only a few men with little capital are content 

 with a small rate of interest and small remuneration for their 

 skill, but that to induce many men with much capital to be 

 employed in the particular manufacture, a large rate of interest 

 and considerable remuneration are required, hence the supply 

 curve will be such as shown in Fig. 2, where the price P is that 



