demand and price, each depending on the other. The demand depends on the price, as the price increases the demand decreases; and the price depends on the demand. The supply is a fixed quantity; the equality ultimately to be produced between the demand and supply cannot be accomplished by increasing the supply, it must therefore be produced by increasing the price to such a point that all demand is withdrawn save that which is equal to the supply. Let it be supposed that a picture of a deceased artist is offered for sale. If the price were fixed at £100 perhaps thousands of people would wish to buy it; if the price were raised to £500 the demand might be reduced to fifty people; if the price were still further raised to £1000 the demand might be reduced to ten persons, who would keenly compete against each other for the possession of the picture. Finally, the price might be pushed up to £1800, and the demand might be reduced to that of two individuals, A and B. B has perhaps decided not to give more than £1900 for the picture, whereas A might be willing to give as much as £2000. The price, therefore, will be fixed at some point between £1900 and £2000. What this point shall be, is determined by what Adam Smith termed the higgling of the market. The owner of the picture may know that A will give £2000 rather than lose the picture; whereas A may not know that B has determined to give no more than £1900. In such a case the owner of the picture may induce A to give him £2000 for it; but if A knows that B will only offer £1900, and that the owner of the picture is determined to sell, he will of course offer a sum only slightly exceeding £1900. We may suppose this sum to be £1910. At this point the effectual demand is equal to the supply; for B withdraws his demand when the price exceeds £1900, and the only demand which remains is that of A, who becomes the possessor of the picture.

Every article which has an exchange value is characterised by two qualities, viz.: Value in use, and Difficulty of obtaining it.

The inquiry into the causes which regulate the price of such a commodity as a picture of a deceased artist is not yet exhausted. It may be asked, Why should A be willing to give £2000 for the picture whilst B will only offer

1900? This question leads to a further investigation of the elements of value. The exchange value of every commodity is influenced by two circumstances; its intrinsic utility or value in use, and difficulty of attainment.

Under the first head, value in use, are comprehended those qualities which satisfy some want or gratify some desire. Both these elements are present in every commodity which has an exchange value. Where difficulty of attainment is absent, an article, however indispensable or beautiful, possesses no exchange value. Thus air, though indispensable to life, ordinarily possesses no exchange value, because every one can obtain without difficulty as much air as he requires. But the air in a diving-bell has an exchange value, because it would be impossible to obtain it without an expenditure of labour and capital.

The most beautiful flowers have no exchange value in the meadows and woods where they grow, because there every one can obtain as many of them as he pleases. But they possess exchange value when they are brought into towns, for here the element "difficulty of attainment" again becomes active.

On the other hand, where "value in use” is absent no commodity has an exchange value, however difficult it may be to obtain; for no one will purchase that which neither satisfies a want nor gratifies a desire. The top brick in the chimney would have a large supply of “difficulty of attainment," but its value in use would not be

more than that of any other brick, and therefore it would not have more exchange value.

The price of commodities is influenced in different degrees by these two elements. "Difficulty of attainment" generally exerts more influence in regulating the price of an article than "value in use." For instance, the value in use of a pair of boots is so great, that probably few would dispense with them if they cost five guineas a pair. But in this case the element "value in use" is only partially operative, and the price is almost entirely determined by "difficulty of attainment." It must however be remembered that value in use is always present, otherwise the article would command no price whatever. It has been explained that "effectual demand" consists of a wish to possess combined with a power to purchase. It is this effectual demand which influences the price of commodities. It is evident that “a wish to possess" any article is absolutely controlled by its value in use, that is, its power to satisfy some want or gratify some desire. The power to purchase any article is, on the other hand, controlled by the difficulty of its attainment. Thus, if a man came to me and offered to sell me 100 hearses, a great bargain, I should not be in the least inclined to close with him, because the hearses would have "no value in use" to me, and therefore I should have "no wish to possess" them. On the other hand, if I knew that on a certain day such pictures as the Rembrandts in the National Gallery were going to be sold by auction, I should not therefore think it possible that I could become the possessor of one of them. My “desire to have" them would be very great; but "the power to purchase" would be entirely absent, because the “difficulty of attainment" of such treasures would send the price up far beyond my reach.

In the previous example of the causes which regulate

the price of such a commodity as one of Raphael's pictures, the element "value in use" is more operative than "difficulty of attainment." The difficulty of attainment is the same to A and B ; the supply is absolutely limited, the price is therefore determined by the pecuniary value which A and B respectively set upon the gratification they will derive from possessing the picture. It is impossible here to analyse the causes which make A fix upon £2000 as the pecuniary value of the pleasure he will derive from the picture, whilst B thinks his desire for it is not worth more than £1900. It is quite possible that each possesses an equal desire for the picture, and that it would afford them both an equal amount of gratification; but B may be a less wealthy man than A, and he may therefore not feel justified in spending an equally large sum in the purchase of the picture.

It is therefore evident that the price of an article, the supply of which is absolutely limited, is mainly determined by the pecuniary value which certain individuals set upon its power to satisfy some want or gratify some desire; difficulty of attainment is not however absent, even in this case; because the price diminishes as the difficulty of attainment decreases, and would cease to exist if difficulty of attainment were entirely absent.

The price of agricultural produce. The causes must now be examined which regulate the price of those commodities whose supply can only be increased by a greater proportional outlay of labour and capital, and which therefore become more expensive as the supply is increased. Agricultural produce is the most important of the commodities belonging to this class; but it also includes the produce of mines and of fisheries. In order to explain what is meant by an article necessarily becoming more expensive as its supply is increased, let it be supposed that a party of emigrants form a village, and

that they select, as they naturally would, the most fertile ground available for their purpose. We will also suppose that this village consists of fifty persons, and that all the food which they require is raised on the fertile land immediately surrounding their settlement. In the course of a few years the population of the village increases from 50 to 150; it is therefore evident that the community requires three times as much food as it did when first it was formed. Where is this increased supply of food to come from? It is replied,-by going a few miles out of the village there is abundance of fertile land from which the additional food can be supplied. This is quite true; for we have given the village the advantage of placing it in the midst of a fertile district. But the food which is raised a few miles out of the village will not be brought to market at so small a cost as that which grows close at hand. The cost of carriage must be paid for by the consumers. Suppose that wheat grown immediately on the confines of the village had been sold at 10s. a quarter; the corn raised on equally fertile ground at a few miles' distance could be grown at a similar cost; but the labour of conveying this corn to the place where it is required must be remunerated, and it may be supposed that the rate of remuneration is 9d. a quarter. When therefore the corn reaches the village its price is 10s. 9d. a quarter. The price of all the corn consumed in the village will therefore be raised; for those who own the land immediately joining the village will not continue to sell their corn at Ios. a quarter when corn in no way superior to theirs realises 10s. 9d. In this example it has been supposed that the community is surrounded by an abundant supply of equally productive land, and that therefore when an increased supply of food is required the only additional cost incurred is the expense of carriage. But it is easy to perceive that the increased labour of obtaining an