PRINCIPLES OF VALUE AND PRICE 427 



134. CONDITIONS OF SUPPLY 1 

 BY F. W. TAUSSIG 



In both of these statements of the principle of market value the 

 older one of an equation and the newer one of the marginal utility of 

 supply the underlying assumption is that a fixed quantity is put on 

 the market. But is this assumption tenable? Does it conform to 

 the usual state of facts? We have just said that demand, hi the 

 sense of quantity demanded, is not independent of price. Is not the 

 same true of supply ? In the ordinary case it is hardly accurate to 

 say that the quantity offered in the market is fixed, and is independent 

 of price. As price goes higher, more sellers will be tempted to offer 

 their wares, and supply will become larger. As prices go lower, 

 supply will become smaller. Must not the theory of market value 

 be adjusted to variable supply as well as to variable demand ? 



It is 1 true that in some instances the supposition of a fixed supply 

 is clearly in accord with the facts. When a large crop of strawberries 

 comes on the market it must be disposed of once for all. There is 

 no keeping back any part of the supply of a perishable commodity. 

 The total quantity on hand must be disposed of for what it will fetch 

 for the marginal price. Not very long ago the list of commodities 

 of this kind was a large one; it included fresh fish, all vegetables and 

 fruits, even meat. But modern improvements for the preservation 

 of most such things, through cold storage and canning, has greatly 

 shortened the list. Most commodities are not put on sale with head- 

 long suddenness. They are offered in installments. They come into 

 the market in a flow or stream, not as an abruptly offered stock. The 

 rate at which they come in, and the amount which will be offered at 

 any given time, depend on the price. A higher price quickens the 

 flow and leads to larger supply; a lower price checks the flow. 



It is not difficult to adjust the theory of market value to the case 

 of variable supply. On Fig. 4, let SS f represent the conditions of a 

 supply that varies with price, becoming greater as price rises and 

 smaller as price falls. Here, as on the previous figures, quantities are 

 measured horizontally along the axis OX or parallel to it, and prices 

 perpendicularly along the axis OF or parallel to it. At the price SA, 

 we may suppose the quantity OA to be forthcoming on the market. 

 As the price rises, the quantity increases. At the price PP', the 



'Adapted from Principles of Economics, I, 144-50, i7-7i 180-85, 189-91. 

 (Copyright by the Macmillan Co.) 



