PURCHASING POWER 



589 



grower is interested in the price which he can get but only so 

 far as it will tend to give him a greater advantage in paying 

 for the things which he buys. Figure 251 will serve to point 

 this out. It details the relationship between the farm price 

 of apples, taxes per acre of farm real estate, and farm wage 

 rates in Pennsylvania for the following periods: apple prices, 

 1910-38; taxes, 1913-37; wage rates, 1911-38, taking apple 

 prices and wage rates as 100 from 1910 to 1914 inclusive 

 and taxes as 100 in 1913. The information was compiled by the 

 Pennsylvania Agricultural Experiment Station. 



Taxes on farm real estate show very little relationship to 

 the price of apples. It will be noted that in 1921, when apple 

 prices were at the peak for the 29-year period, taxes were not 

 comparatively as high. In contrast, taxes reached their high 

 point in 1931, one year prior to the low point in the price of 

 apples. 



Farm wage rates present a somewhat different picture. 

 There is a marked correlation between the cost of farm labor 

 and apple prices. Wages do not fluctuate so violently and tend 

 to lag a year or two behind changes in apple prices. It can 

 be expected that orchardists w^ould use less labor in years fol- 

 lowing low prices and somewhat more labor in years follow- 

 ing high prices. 



To a significant degree, the relationship existing between 

 farm wages and apple prices is representative of many vari- 

 able costs. Conversely, the lack of correlation between tax 

 rates and apple prices may be considered representative of 

 fixed costs. The conclusion may be drawn that the constant 

 expenses in fruit production are the ones which are likely to 

 create financial problems in the face of low farm prices. This 

 further emphasizes the need to keep fixed costs at a minimum 

 through careful planning at the time the young fruit farmer 

 goes into business. 



The purchasing power of individual commodities tends to 

 be affected more by the price which that product brings than 

 by the cost of producing the product. That is, there are cer- 



