THE PRICE OF WHEAT 163 
But the fact that the price of wheat did not fall in 
exact proportion to the fall in general prices should 
only in certain circumstances lead us to this conclusion. 
In general, relative prices do not remain unchanged with 
changes in the general level. The abundance or scarcity 
of the money material is only one factor. When consider- 
ing individual commodities we must take account of 
the important conception of the degree of elasticity of 
demand. If we regard the problem in its simplest form, 
we see that an individual will distribute his expenditure 
over the various commodities in such a way as to obtain 
the maximum satisfaction. Now, suppose the money 
material decreases and there is a tendency therefore 
for all prices to fall, will these decreases in relative 
prices be in proportion to the corresponding decrease in 
general prices which, ceteris paribus, will result from 
a diminution in the supply of money? Obviously 
not. The elasticity of the demand for the individual 
commodities differs greatly. Those commodities which 
are necessaries will not fall to such an extent as the 
fall in general prices, while those for which the elasticity 
of demand is unity will tend to fall, other things 
remaining the same, in the same proportion, and those 
commodities whose elasticity of demand is greater than 
unity, more than proportionally. 
Professor Irving Fisher, pursuing this question in 
detail,* selects four typical commodities and shows how, 
in each case, the effect on the general level will be 
different. In the ease of highly elastic demand, the 
probability is that a fall in the price of the commodity 
will cause a rise in general prices, a proposition which 
Dr. Fisher regards as the pons asmmorwm in ‘‘the test 
of one’s knowledge of the fundamental distinction 
between those influences affecting the general price level, 
*<(The Purchasing Power of Money.’’ Fage 382. 
