AGRICULTURAL ECONOMICS 



which is satisfied tends to adjust itself to the cost 

 of producing that share of the supply which is 

 produced under the most unfavorable circum- 

 stances. But it is also true that the price which is 

 offered at a given time, and which corresponds to 

 the marginal utility at that time, determines the 

 maximum amount which can be expended in the 

 production of a given article with profit and hence 

 determines ultimately how far down the scale of 

 less and less favorable circumstances its produc- 

 tion can be carried on. Thus it is that the forces 

 which lie behind the demand for an article, and 

 the conditions under which the article may be 

 supplied, regulate its price. 



Let us apply this principle to a concrete case by 

 asking the question, "What determines the price 

 of wheat?" The value which the wheat con- 

 sumers will place upon wheat is determined by the 

 intensity of their desire for wheat bread ; but the 

 intensity of that desire varies with the amount per 

 capita they are consuming from day to day. The 

 more they consume each day, the less intense the 

 desire for wheat, and the lower the price which 

 the consumers are willing to pay for it. But, 

 again, the less the consumers are willing to pay, 

 the fewer are the farmers who can introduce 

 wheat into their field-systems with profit, and 

 the smaller the supply will tend to become. Thus 

 it is that the price rises when the demand increases 

 relatively to the supply, and falls when the sup- 



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