16

ECONOMIC PRINCIPLES

of the hands of producers, no point of importance arises to
modify the problem as a result, and we may proceed as if
they were actually identical. A dealer, who is neither
increasing nor decreasing his business, must replace goods
sold from stock by others obtained from the makers, It
will be the cost of procuring fresh supplies which will be the
principal feature influencing him in putting a price on the
goods, rather than the actual cost of the goods which he
sells from stock. If he procured his stock more cheaply
than he could now replace it, he will generally not give
away such an advantage. Competitors, who carry smaller
stocks or no stock, will be obliged to quote prices
determined by current costs, and hence he will not be
driven to quote a lower price based on previous costs. If
prices have fallen since his stock was laid in, he may desire
to recoup himself for the actual outlay he has made, but
rivals, who procure supplies at current prices, will be in a
position to undercut him, and hence competition, if keen,
will compel him to base quotations on current costs of
production, whether these be the same as, or different from,
those which were incurred in the making of the particular
articles offered for sale. In this respect, again, we may
treat the goods sold as if they were actually those currently
passing out of makers’ hands. The hypothesis of a steady
stream of production, and a steady consumption, enables
this point of view to be taken. We deal with the organisation
 of production as if it had become settled on regular
lines, and are concerned with the inquiry as to how those
lines are determined by the conditions of demand and
supply for the commodity considered.
We have to do with a supply, not limited rigidly by
natural conditions, or controlled by one or more monopolists,
but which is capable of extension in indefinite degree. If
it be not actually indefinitely extensible, the limits which
concern us are not those of the physical possibilities of the
case. The supply, though thus extensible, is not equally
free to all. Its increase can only be secured on the condition
 of expending labour and thought. What limits does
this condition impose upon the supply? If we may assume