38

ECONOMIC PRINCIPLES

production. If the enlarged demand be not likely to be
maintained, it will not be profitable to procure expensive
permanent aids to production, whose services would not
cover their cost before the demand shrunk to its usual level,
even if it be physically possible within the available limits
of time. On the other hand, the corresponding productive
instruments cannot at once be dispensed with on a reduction
of demand, and if a renewal of the old demand be anticipated,
it will not be worth while proceeding far with the reduction
of the apparatus of production, so as to correspond with the
temporarily checked demand. Even if the change in demand
be likely to be maintained, it will not be physically possible
to adjust, without delay, all parts of the machinery of production
 to the modified scale of demand. For a time,
therefore, the whole of the costs of production are not capable
of variation, and hence not all the costs of production can
operate to condition the volume of supply. If an increase
of the variable part of the expenses be accompanied by an
increase of product whose value exceeds the increase of expenses,
 it will yield a profit, a contribution toward the fixed
part of the expenses. Whether it will be worth while undertaking
 such addition to the supply depends on the effect on
the price secured, not merely for such additional supply, but
for the whole, If the addition can be disposed of without
affecting the market for the bulk of the supply, it may be
worth producing, but the contrary if its sale spoil the market
for the rest. With falling demand, during the process of readjustment
 of the productive equipment to the reduced requirements,
 the reduction of output may often fail to reduce
expenses to correspond to the fall in value, and a ruinous
competition, to dispose of excessive production (excessive
relative to reduced demand), may result in market values unremunerative
 to producers, The correspondence of value with
cost of production will not be again secured till the conditions
of production are adjusted (approximately, at any rate) to the
new conditions of consumption. Meanwhile, some producers,
realising that their productive equipment has lost value, and
with impending ruin as a stimulus, may put on the market
quantities of product for disposal at any price which will cover