CHAPTER VI 



MILK PRICES 



Section i. Price Relationships 



Price is a matter of relationships of a bewilderingly 

 complex nature. As an eastern editorial writer puts it, 

 " the intricacy of price making in the New England mar- 

 kets is beyond the understanding of man." ^ Price is the 

 resultant of the action and reaction of supply and demand 

 and of the complex forces lying back of each. It is gen- 

 erally understood that a shortage in supply will bring 

 about high prices and that a surplus will in the same way 

 result in low prices. On the other hand, it is not so gen- 

 erally realized that a change in the demand will also in- 

 fluence price, which is but the focal point of the forces 

 of supply and demand, and that price actually influences 

 demand. Thus a decrease in the supply of milk usually 

 means an increase in the price. But dealers are keenly 

 aware of the fact that such an increase in price will most 

 surely mean a decrease in consumption. A Toledo firm 

 reports that in the summer of 191 8 an increase in the price 

 of from 13 to 15 cents, amounting to a 15 per cent in- 

 crease, caused a decrease of consumption of 8 per cent. 

 Other instances have been reported where such decreases 

 have amounted to 10 or 20 per cent. The decrease in 

 consumption of milk owing to an increase in price varies 

 widely with such factors as wage increases, rise of other 



• Ntw England Dairyman, Apr., 1917, p. 6. 

 188 



