THE IXCIDEXCE OF TAXES 



in 



price or cost of production which is just sufficient to tempt a few 

 producers to produce a little of the article. 



Then if O P' is the actual cost out of pocket required to 

 produce a small quantity of an article, and if O P is the lowest 

 cost at which any manufacturer can afford to produce it, the 

 area P'D'DM represents the whole profit to the producing 

 capitalist when the price is O M. The line D'P' is not necessarily- 

 parallel to D P, nor vertical, the bare cost of production of the 

 article generally increases as the quantity increases ; and in that 

 case D'P' is not vertical. Again, the rate of interest required to 

 tempt additional capital into a particular field is not constant, 



Fig. 2. 



but increases, hence PTX is steeper than P D. I see at present 

 no means of experimentally ascertaining the gain reaped by 

 producers represented by the area P D D'P' : it can be approxi- 

 mately estimated by considering the prevailing rate of interest 

 in the producing community and the amount of capital required 

 for the production of the unit of the article. 



We see that the gain of a manufacturing capitalist may be 

 divided into two parts the profit as a trader, and the interest 

 as a capitalist. 



In safe trades, where there are few fluctuations in price, the 

 former gain may perhaps be the most important ; in more specu- 

 lative trades the latter. 



