PRINCIPLES OF VALUE AND PRICE 485 



F. The Mechanism of the Market as Influencing Prices 



154. SUPPLY AND DEMAND BROUGHT TOGETHER THROUGH 

 THE AGENCIES OF THE MARKET 



The diagram on p. 486 is designed to show the central position 

 occupied by our market mechanism as a mediating force between 

 producers' supplies on the one hand and consumers' demands on 

 the other. Beginning at the top of the diagram, and following it 

 downward, we pass from natural determinants of what can be pro- 

 duced to rational determinants of what shall be produced. The 

 "business of farm production" is very much influenced by the char- 

 acter and activities of the market. What a particular farmer or a 

 given section decides to produce is based very much upon the will- 

 ingness which marketmen have indicated to handle one or another 

 class of product. Often the dealers give assistance, financial or other, 

 in order to stimulate the production of some certain article. 

 Transportation, while not strictly a marketing agency, yet occupies 

 a highly important intermediate position, determining the possibili- 

 ties of bringing any given demand within touch of any particular 

 source Of supply. We might say that it makes any actual stock an 

 effective supply for such a market zone as it reaches. 



If we turn to look at the matter from the side of demand, the 

 important influence of the market mechanism again appears. Begin- 

 ning at the bottom of the chart, we find demand resting upon condi- 

 tions of physiological necessity which are fixed in character. But we 

 see, as we look at the other factors in the making of effective demand, 

 that there is a considerable field within which the agencies of the 

 market are able to modify and direct the character and volume of 

 actual market demand. The work of advertising, of making tempting 

 displays of certain goods, or of selecting particular articles in whose 

 interest the buying public is to be vigorously solicited all these 

 activities of the market go far to modify intellectual estimates or 

 social esteem and to determine the distribution of the family income 

 to various classes of expenditures or even the relative portion which 

 shall be spent or which shall be saved. 



We need to get away from thinking of the process of price-making 

 in vague general terms and in the passive voice. It is a very concrete 

 process, made up of a large number of personal transactions, and the 

 precise conditions under which each of these personal transactions 

 takes place are created by the activities of our marketing system. 



