142 WHEAT PRODUCTION IN NEW ZEALAND 
adjust their supply to the demand as best they can with 
the appliances already at their disposal. 
In long periods, on the other hand, the flow of 
appliances for production is adjusted to the demand for 
the products of those appliances. All investments of 
capital and effort in providing the material plant and 
the organisation of a business, and in acquiring trade 
knowledge and specialized ability, have time to be 
adjusted to the conditions of demand. The length of 
this transitional period depends on the mobility of 
capital and labour, and the time required for the attain- 
ment of the necessary trade knowledge and skill in 
organisation. Those producers who were on the margin 
of profitable production will now, if market price rises, 
commence to produce. Their influence in bringing 
supplies on the market quickly may accelerate consider- 
ably the rate at which the transition is effected. The 
result of this adjustment is a new equilibrium between 
demand and supply at which a price approximating to 
cost of production will be determined. Of course the 
price will not be below the expenses of producing on 
the margin of production. If price were to fall to such 
a level then ultimately supply would be contracted until 
the production at the margin was profitable. 
In the long period, then, the price tends to be 
equal to the marginal cost of production, that is, 
the cost of production per unit of output of the 
marginal firm, or also the marginal cost of pro- 
duction of each normal firm. The price thus arrived at 
is the normal or long period price, and the degree to 
which this price approximates to cost of production will 
depend upon the prevalence of ‘‘economic friction.’’ 
If capital and labour are free to move from one industry 
to another, if every man is sufficiently well-informed as 
to the course of action most beneficial to him, if compe- 
tition is free, then, ceteris paribus, normal price and 
