36 AGRICULTURAL ECONOMICS 



supply will determine how high the price must be before the 

 producer can afford to increase the supply. Marshall says, 

 " For long periods the supply price is that which is just needed 

 to call forth those new investments of capital, material and 

 personal, which are required to make up a certain aggregate 

 volume or production." 1 The higher the cost at which the 

 producer adds an increment to the supply, the more limited the 

 total supply that will be put upon the market ; but the smaller 

 the amount of an economic good consumed, the more intense 

 is the desire for it and the higher it is valued. Thus it is that 

 the marginal utility, or the intensity of the last want which is 

 satisfied, tends to adjust itself to the cost of producing that share 

 of the supply which is produced under the most unfavorable 

 circumstances. 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 production 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. 



Causes of fluctuation in values. Values may fluctuate from 

 year to year because of changes in the quantity produced, or 

 changes in the quantity demanded, that is, changes in the 

 supply or in the demand. Fluctuation in the annual produc- 

 tion may be due to the climate, to the ravages of insects, or to 

 the conscious changes in the plans of a considerable proportion 

 of the producers. The more durable the product the less the 

 value will fall as the result of an unusually large crop. A por- 

 tion of the supply can be held over until the next year. The 

 fact that wheat can be held over at a relatively small cost and 

 without losing its usefulness, while potatoes of one year's 

 production have little or no value after the new crop becomes 

 generally available, explains, in part, why a given variation in 

 the wheat crop influences the price less than the same propor- 

 1 Alfred Marshall, "Principles of Economics," third edition, p. 448. 



