As a rule, the price-relation of two commodities is determined by this relation of demand and supply,—by the desire to possess and the difficulty of obtaining them. We must, therefore, examine on what deeper relations supply and demand themselves depend.[610] In the case of the purchaser, the [pg 309] value in use of the commodity and his own ability to pay constitute the maximum limit of its price, which price may, however, be modified by the cost of producing it[611] elsewhere or at another time. In the case of the seller, the cost of production is the minimum limit, which may, however, be extended by the cost of procuring the commodity by the purchaser at another time or place.[612]
Section CII.
Demand.
The purchaser in his demand is wont to consider principally the value in use of a commodity, according as it, in a higher or lower degree, ministers to a necessary want, to a decency or to a luxury. The difference of opinion as to which of these categories any given want belongs depends not only on the nature of the country and the customs of its people, but, for the most part, also, on the prejudices of class and on personal individuality.[613] A reasonable man will employ only the [pg 310] surplus of the first class in the satisfaction of wants of the second, and again only the surplus of the second in the satisfaction of wants of the third.[614]
If the value in use of a commodity rises or falls, and surrounding circumstances remain unchanged, its price also rises or falls.[615][616]
Section CIII.
Demand.—Indispensable Goods.
When the supply of articles of luxury diminishes, the price of them, it is true, rises. But as now there is a number of purchasers no longer able to pay for them, the demand for them also decreases, and their price, as a consequence, rises in a less degree than might be inferred from the amount and condition of the supply merely. And so, on the other hand, an increase of the supply which lowers the price is wont, in the case of pleasures capable of a wide extension, such as are ministered to by fine roots, vegetables, etc., to produce an increase of the demand, and this operates to arrest the falling price.