SUPPLY AND VALUE 3

equilibrium amount. The marginal utility of this lessened
supply is greater than that of the old equilibrium supply.
The demand-price therefore rises, and the whole may find
purchasers at a price above the equilibrium price, that is,
above the expenses of production. To share in such a
market is advantageous, and competition to share in it more
largely means increase of supply. Producers who seek
these advantages will therefore enlarge their output, while
some may be attracted, from other lines of business, into
the industry in question. Thus a movement towards the
equilibrium amount of supply is stimulated.
We have seen, then, that whether the supply be greater
than, or less than, the equilibrium amount, the forces of
competition will stimulate to a movement in the direction of
that amount, At the equilibrium, price measures at once
the cost of production per unit, and the marginal utility of
the supply. A supply and price thus in accord with the
economic forces in operation is called a normal supply and
a normal price.
If we turn to the consideration of the second class of
conditions of supply, much of the above argument will again
apply. In this case the increase of supply involves greater
expenses of production per unit, decrease of supply means a
lessening of expenses per unit, of commodity. If supply and
demand are to be in equilibrium, the price must be adequate
to remunerate producers of an amount whose marginal utility
is measured by that price. In order to be adequate, it must
suffice to cover the expenses of each and every unit of the
supply. Additions to the supply involve expenses per unit
which are greater than those attending the supply of
preceding units, The price must be adequate to cover these
expenses in every case, if we are to regard the supply as
steadily maintained under the inducement of this price.
The expenses of production of the most expensive unit of
the normal supply must therefore be covered by the
corresponding normal price, that is to say, the marginal
=xpenses of production are equal to the price which equates
supply and demand. That price suffices to induce a supply
of such amount that its marginal utility is measured by the