52

ECONOMIC PRINCIPLES

price. If the amount of supply be less, its marginal utility
is greater, and its marginal expenses of production less,
while if it be greater, its marginal utility is less, and its
marginal expenses of production greater. The lines of
argument followed above in the case of constant costs may
be repeated here, the only modification being in the fact
that the stimulus to movement in the direction of the
equilibrium supply is by so much the greater, as the
expenses per unit vary, from the level of the equilibrium
rate of marginal expenses, in this case but not in the former.
At the equilibrium, price measures at once the marginal
utility and the marginal expenses of production of the
supply. Both utility and cost produce effects on the amount
of supply which suffices for equilibrium. Together they
determine the equilibrium. The influence of utility is felt
in determining what price can be secured for a supply of
given amount so that the whole finds purchasers; the
influence of cost is felt in determining whether it is profitable
to produce that supply in view of securing the price so
determined, whether the supply can be, economically
speaking, maintained. The inverse method of statement is
equally valid, and may be given in similar terms. The
influence of cost is felt in determining what price is adequate
to ensure a supply of given volume ; the influence of utility
is felt in determining whether, at that price, the volume of
supply is sufficient to satisfy all who desire to purchase
at that price, or whether it can all find purchasers at the
price. When we contemplate unchanged conditions of production
 and of demand, either constant or increasing costs
being supposed to prevail, the value of the product suffices
to remunerate the productive services concerned in every
part of the permanent supply. Individual producers may be
involved in misfortunes or mistakes which lead to their
giving way to others wiser or more fortunate than themselves,
Making abstraction of such changes of personnel among
the producers, changes which may readily give rise to
oscillations of supply about the equilibrium amount, it may
be said that the most expensive part of the permanent supply
is produced with a view to realising a reasonable profit at