LESSON 64.-DIFFERENT PRICES OF THE

SAME COMMODITY.-Part 1.

WE are now going to see what causes the differences between the prices of the same commodity. We have already said that if the price of any commodity depended only on the cost of production, the price would remain the same, so long as the cost of production remained unaltered. We know that it does not do so, because the supply and demand vary, and cause variations in the price; we are now going to show how these variations of supply and demand cause variations of price. But before doing so, we shall show what causes the alterations in the prices of two or three very common things, and which alterations always puzzle some people to account for.

Changes in the price of bread often take place, especially near harvest time. At that time, farmers and corn dealers always have some old wheat stored up, and they bring much less of it to market, when the harvest is likely to be a bad one, keeping back as much as they can, in the hope of getting a higher price for it when wheat becomes scarcer. This of course makes the supply less; for the supply is, not the quantity stored up, but the quantity for sale. This decrease in the supply would cause a rise in the price of wheat, even if the demand for it were to remain the same, for the millers would buy more wheat than usual, so that they might not have to pay the high price they would have to pay through waiting till the wheat became scarce. This would cause an increase in the demand, and, owing to the double cause of a decreased supply and an increased demand, the price of wheat, and therefore the price of bread, would rise considerably. But when, in consequence of the fineness of the weather, the harvest is likely to be a good one, the farmers and corn dealers being anxious to get rid of their old wheat as fast as possible, bring large quantities to market, which of

course increases the supply. The millers also use up all the wheat they have, before buying more, and buy as little at a time as possible; which makes the demand small. When this is the case wheat falls in price, and bread becomes cheaper.

A few days of wet weather, however, would cause the sellers of wheat to hold back; the supply would decrease, and the price of bread would rise. A return of fine weather would bring more wheat into the market; the supply would increase, and the price of bread would again fall.

Farmers and corn dealers keep back their wheat when it is likely to become scarce, for their own sakes, and not for the good of others. They do themselves good, when the time of scarcity comes, by getting a higher price for their grain; but they also do the people good by keeping it till a time of greater scarcity. Thus, although the sole object of the owners of the corn is to benefit themselves, we see that they cannot do so without at the same sime benefiting the public. It is the same with all kinds of buying and selling. God has so wisely and kindly planned things, that none can do real, lasting good to themselves, without at the same time doing good to others; and the more they benefit others the more they will benefit themselves.

It is in the prices of the most perishable articles that the greatest changes take place; for the sellers of these cannot keep them till they become scarcer, as the sellers of imperishable commodities can do, when they find the supply too large. For example, a fishmonger buys a large stock of salmon when it is scarce, believing that he will be able to sell it at a good profit. But the demand turns out to be much smaller than he expected, and is smaller than his supply. What can he do?-he cannot keep his fish till it becomes scarcer, for it will spoil and be worth nothing. The only thing he can do is to get rid of it as fast as possible while it is fresh; and he can only do this by greatly reducing the price,

and perhaps selling at a loss. Butchers, poulterers, and the sellers of fruit, flowers, and all other very perishable articles, have sometimes to do the same thing.

It is always found that the price of every commodity rises, as the demand becomes greater than the supply, and falls as it becomes less. The demand for anything may become larger than the supply, in two ways-by the demand itself increasing, and by the supply decreasing. So also it can become less than the supply, by the demand itself decreasing, and by the supply increasing. Whenever the demand for anything is greater than the supply, that commodity is dear; and when the demand is less than the supply, it is cheap. It is so for the reasons we are now going to give, which will explain how variations in the supply and demand cause variations in price.

Whenever the supply of any commodity is greater than the demand for it, the sellers know that all of them cannot sell their stock at the price asked; and as each one is anxious to sell his, he will try to get people to buy of him by reducing the price of his goods. Others will do the same, each trying to sell for less than the other sellers, that is, to undersell them,-on purpose to sell as much as possible. Trying or striving, one against the other, for any purpose, is called competition; and whenever sellers strive against others to get custom, -which they do by underselling each other,-prices fall, commodities become cheap. Thus we see that competition among sellers reduces prices; and because there is always this kind of competition when the supply of commodities is greater than the demand for them, prices are low whenever the supply is greater than the demand. But when the supply of any commodity is less than the demand for it, some buyers must go without. Knowing this, some try to get supplied with what they want by bidding more than other buyers offer; that is, by outbidding them. Thus there arises competition among the buyers, and whenever there is such competition,

prices rise. Because of this, prices are high whenever the supply is less than the demand.

LESSON 65.-DIFFERENT PRICES OF THE SAME COMMODITY.-Part 2.

So long as the supply and demand of any commodity remain the same, its price generally remains the same, but as soon as these vary, the price varies also. The extent to which prices rise and fall, depends on the amount of competition among the buyers and sellers. When there is a strong competition among buyers, prices rise very high; but when there is but little competition, prices rise but little. So also when there is a strong competition among sellers, prices fall very low; but when there is but little competition among them, prices fall but little. Prices vary according to the amount of competition; the amount of competition varies, just as much as the supply and demand vary; therefore, prices vary, just as much as the supply and demand, rising as the demand rises above the supply, and falling as the demand falls below the supply, and to the same extent.

But we must not forget that it is only to a certain extent, only within certain limits, that the variations. of supply and demand, change the prices of things; for, when the demand for any commodity decreases so much as to bring down the price to a sum which does not leave the producer a fair profit, he ceases to produce it. As we have before said, no changes in the supply of, and the demand for gold, can ever cause it to sell for the same as silver, so long as gold costs so much more than silver, to produce it. Then again, when a large increase in the demand for any commodity, causes such an increase in the price as leaves an unusually large profit to the producer, any further increase in the price, is stopped by other persons, who are tempted by the

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large profits to produce the same commodity, and thereby increase the supply. These are the limits within which, the variations of supply and demand, cause changes in price.

Nor must we forget that the variations of supply and demand, are only one of the causes of differences in price; the other is, variation in the cost of production. Whenever a producer of any kind, succeeds in reducing the cost of the production of his goods, he reduces the price, with the hope of thereby getting more custom. And when the cost of production increases, either through an increase in the price of raw material, or of labour, the producer is obliged to raise the price of his goods. Thus there are two causes for the different prices of the same commodity; variation in the supply and demand, and variation in the cost of production.

Generally speaking, the supply of and the demand for commodities, are equal; great differences sometimes. arise between them, but they seldom last long. Perhaps what we are now going to say, will shew in what way they are kept equal. A bookseller brings out a lot of new books, which he thinks will sell at a good profit. But he is disappointed; the demand for them is much smaller than he thought it would be, and after keeping them for a long time, he finds that to sell them at all, he must sell them at a loss. He suffers loss because he has produced something the people do not want; and this loss, will cause him to take greater pains at another time, to find out what the people do want,-to suit the supply to the demand. At another time, the bookseller produces a book that is very much wanted, the people want more than he has brought out, the demand is larger than the supply, and he gets a good profit by their sale. The large profit encourages him to produce more and more, until the supply is equal to the demand; when this is done, so long as the supply is kept equal to the demand, he is rewarded by a fair profit; but directly he produces more than is wanted, that is, directly he over