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Show ON THE NATURE AND ( CH. II .. In this case of a fall of prices, as in the other of a rise of prices, the actual quantity of the cornmodity supplied and consumed n1ay possibly, after a short Struo·O'le be the san1e as before; yet it cannot be bb ' said that the den1and is the san1e. It n1ay indeed exist precisely in the san1e degree, and the actual consun1ers of the con1modity n1ight be perfectly ready to give \vhat they gave before rather than go 'vithout it; but such has been the alteration in the means of supply con1pared with the den1and, that the cornpetition of the producers renders the same intensity of den1and no longer necessary to effect the supply required; and not being necessary, it is of course not called forth, and the price falls. It is evidently, therefore, not merely e.r:tent of actual den1and, nor even the extent of actual dcn1and cotnpared vrith the extent of actual supply, which raises prices, but such a change in the relation between supply and demand as renders nL~ cessary the expression of a greater intensity of delnand, in order either peaceably to divide any actual produce, or prevent the future produce of the same kind from failing .. And, in the satne manner, it is not n1erely e~vtent of actual supply, nor the extent of the actual supply compared 'vith the actual dcn1anc1, that lo\vers prices, but such a change in the relation of the supply, compared \Vith the demand, as renders a fall of price necessary, in order to take off a ten1porary abundance, or to prevent a constant excess of supply contingent upon a diminu ... SEC. II.j :MEASURES OF VALUE. 71 tion in the cost of production, without a proportionate diminution in the price of the produce. If the tertns den1and and supply be understood and used in the way here described, there is no case of price, whether temporary or pern1anent, "vhich they will notdetern1ine; and in every instance of bargain and sale it will be perfectly correct to say that the price will depend upon the relation of the demand to the supply. . I \Vish it particularly to be observed that in this discussion I have not given any ne'v meaning to the terms, demand and supply. In the use which I have occasionally n1ade of the words intense and intensity as applied to detnand, my sole purpose has been to explain the meaning 'vhich has hitherto always been attached to the term detnand when it is said to raise prices: Mr. Ricardo in his chaptet" On the irifluence Q{ denzand and supply on prices,* observes, that " the demand for a commodity cannot be said to increase, if no additional quantity of it be purchased or consumed." But it is obvious, as I have before remarked, that it is not in the sense of mere extent of consumption that demand raises prices, because it is aln1ost always when the prices are the lowest that the e .. vtent of consumption is the greatest. This, therefore, cannot be the meaning hitherto attached to the tenn, demand, when it is said to raise prices. l\1r. Ricardo, however, subsequently quotes Lord Lauderdale's statements respecting value, t and allo,vs them to be true, -x- Principles of Polit. Econ. chap. xxx. p. 493. 2d edit. t Id. p. 495. F4 |