the persons who labour to produce it; the farmer, the miller, and the baker. Thus we should find that the price of bread, like the price of coal, depends chiefly on the cost of production.

So also with a coat; the tailor, in putting a price on it, is guided by what the cloth, lining, buttons, thread, labour, &c., cost him. To this cost, he adds something for profit, and charges for the coat accordingly. The price of the coat depends on the cost of production; if that cost were less, the price would be less, and if it were greater, the price would be greater. The shoemaker, the hatter, the linen draper, the manufacturer, the butcher, the grocer, the builder, the cabinet-maker, and all others who sell things, are guided in putting prices on their commodities, by what they cost them; that is, by the cost of production. The owners of ships, coaches, canals, railways, and all other kinds of conveyance, charge for carriage, according to what their ships, coaches, canals, railways, &c., cost them; they make the price of carriage depend on the cost of production.

Some years ago, calico that now sells for threepence a yard, used to sell for twice as much; that was when it cost the producers twice as much as it now does. If the cost of production had not decreased as much as it has, the price would not have decreased so. It would be easy to name many other things, to show on what their prices depend; but enough has been said to show that, the price of any commodity depends chiefly on the cost of production.

LESSON 62.-SUPPLY AND DEMAND.

AND now we have to see on what else price depends. If the price of any commodity depended altogether on the cost of production, the one would not alter-or vary -without an alteration-or variation-in the other. But it is found that price often varies, when there is no

variation in the cost of production. What causes it to do so we shall see by the following example.

A butcher takes his meat to market, and after reckoning the cost of production, finds he can afford to sell it at eightpence a pound, which is the price he puts on it. For some time, he sells at this price, but as the day draws to a close, he finds he has much more meat than he can sell, at the price he asks. What can he do to

sell his meat, for it will not do for him to have a lot of it left on hand to spoil? The only thing he can do is to reduce the price, which will enable some to buy, who otherwise could not afford to do so; and in this way he may sell it all. To sell the whole of his meat, he may have to reduce the price so much as to leave no profit; or he may have to reduce it below the cost price, and so lose by it. In such a case as this, the butcher first fixes his price, according to the cost of production, and is afterwards obliged to alter it, because the quantity for sale is greater than the quantity wanted, at the price asked. If these quantities were equal, he would not have to alter the price of his meat.

Now let us suppose another case. The butcher, after selling for some time at eightpence a pound, finds his meat selling very fast, so fast that he sees there is much more wanted, than there is for sale. Seeing this, he knows that some people must go without, for there is not enough for all: he knows, too, that many will give a little more for his meat, rather than go without what they so much want. Accordingly, he raises his price, but not so much as to drive away too many customers, and so prevent his selling out. If he should make a mistake, by raising the price too much, he could easily set the matter right, by lowering it a little. Such an alteration of price as this sometimes takes place, and whenever it does, it does so because the quantity wanted is greater than the quantity for sale.

People give two very convenient names to these quantities; the quantity for sale they call the supply, and

Whenever

the quantity wanted they call the demand. either of these is greater than the other, there is said to be an excess of the greater over the less. Understanding this, and looking over what we have said about the variations that take place in the price of meat, we shall see that the fall in price is caused by an excess of the supply over the demand, and that the rise in price is caused by an excess of the demand over the supply. The butcher first fixes his price according to the cost of production, and when the demand is equal to the supply at that price, he gets it. When, however, the supply and demand are unequal, he has to vary his price, to raise or lower it according as the demand is less or greater than the supply.

All that has been said concerning the price of meat might be said of the price of every other commodity; and therefore we say, prices are fixed by the cost of production, and are varied by the supply and demand. By this we mean the cost of production is the main, the principal cause of the price of any commodity, and the changes in the supply and demand are the causes of the variations in its price. Hence we see why the price of a commodity does not depend only on the cost of production; it does not, because the supply and demand have the power of altering the price. We see also on what price does depend, that it depends on the cost of production, and on the supply and demand.

Some people think that the value of a thing depends on its usefulness; but that is a mistake, for if it did, then iron would be much more valuable than gold, for it is much more useful. The value of each of these metals depends chiefly on the cost of its production, and partly on its supply and demand.

Now that we know on what the price of every commodity depends, we shall make use of our knowledge in accounting for the differences that exist between the prices of different commodities, and between the prices of the same commodity at different times.

LESSON 63.-DIFFERENT PRICES OF

DIFFERENT COMMODITIES.

To know why some things sell for more than others, we have only to ask ourselves the question, Why does gold sell for a higher price than silver? and then find out the answer. This will not only give us the reason why gold is dearer than silver, but also why most things that are dearer than others are so.

The price now given for gold, is just enough to pay for the cost of producing it, and to give a moderate profit to the producer. The price paid for silver, pays for its production also, and leaves a fair profit for the producer. In the cost of producing gold, there is the cost of finding the ore, and the cost of separating the metal from it. The same things have to be paid for in obtaining silver; but because gold is naturally much scarcer than silver, the cost of finding it is greater; and because the trouble of separating the gold from the ore, is much greater than the trouble of smelting silver ore, that cost is greater also. Altogether, it is found to cost about fifteen times as much, to produce any quantity of gold, as to produce the same quantity of silver; the cost of production is fifteen times as great. Because of this, the producer of gold is obliged to charge about fifteen times as much for it, as the producer of silver charges for it. Thus while silver can be bought for five shillings an ounce, gold cannot be bought for less than seventy seven shillings an ounce, or more nearly, for less than £3 17s. 10d. From this we get the reason why the price of gold is higher than the price of silver; it is, because the cost of production is greater.

If larger quantities of gold should at any time be discovered, or a cheaper manner of separating the gold from the ore, so as to make the cost of production less, it will sell for less; but so long as it continues to cost as much to produce as it now does, the price will remain

the same, or very nearly the same. The price will vary with the demand for it, but should the demand. ever fall off so much as to make it impossible for the producers to get a paying price for it, they will cease to produce it. Variations in the supply of, and the demand for gold, will cause variations in its price, but the power of supply and demand in varying its price, will never be so great as to cause gold to sell for as little as silver, while the cost of production is so much greater.

The greater cost of production, is the reason why sugar sells for more than salt; silver for more than copper; copper for more than iron; plate glass for more than crown glass; silk goods for more than linen, and linen for more than cotton goods. Neither of these is dearer than the other, because there is a greater difference between the supply and demand of the one than of the other. For example, sugar is not dearer than salt, because there is a greater difference between the supply of and the demand for sugar, than between the supply of and the demand for salt. The only reason why sugar is dearer than salt is, because it costs more to produce; the cost of production is greater. The same is true of all things that are dearer than others; name any two things that differ in price, and it will always be found that the dearer article costs more to produce it than the cheaper. Difference between the cost of production, is the cause of the difference between the prices of different things;-some things cost more than others, because it costs more to produce them.

As we said of gold and silver, so we say of all commodities; so long as the difference between the costs of production of any two things remains, so long the difference in price will exist. The difference will vary a little, with the supply and demand; but the changes in the supply and demand, will never entirely do away with the difference, because as soon as the price of any commodity falls below a profitable price, the production of that commodity will cease.