114 Economic Cycles: Their Law and Cause 



ing four kinds of pig-iron were obtained from the Statis- 

 tical Abstract for 1912, p. 572, and the annual percentage 

 changes in the prices of the four kinds, together with 

 their mean annual percentage changes, are given in 

 Table V of the Appendix. The second and last columns 

 of Table V were used in computing the law of demand 

 for pig-iron in the United States. 



The graph of the law of demand for pig-iron is given 

 in Figure 24. The correlation between the percentage 

 change in the product and the percentage change in the 

 price is r = .537. The equation to the law of demand 

 is y = . 5211a:— 4.58, the origin being at (o,o). Our re- 

 presentative crops and representative producers' good 

 exemplify types of demand curves of contrary charac- 

 ter. In the one case, as the product increases or de- 

 creases the price falls or rises, while, in the other case, 

 the price rises with an increase of the product and falls 

 with its decrease. 



The two preliminary difficulties are now cleared 

 away. We know that as the yield per acre of the crops 

 increases the physical volume of trade for producers' 

 goods increases; and we know, furthermore, that the 

 law of demand for a representative producers' good is 

 such that as the product increases the price increases. 

 If now a third fact, which has already been established, 

 be added to these two, an hypothesis conformable to 

 the three facts may be made which will give a working 

 theory for examining whether the cycles in crops pro- 

 duce the cycles in general prices. The third fact to 

 which reference is made is that the law of demand for 



