200 ECONOMIC PRINCIPLES

within the country itself. A great part of international
trade consists of this class of exchange. Thus, in the trade
between Brazil and the United States, we find such articles
as coffee on the one side and mineral oil on the other.
Practically, the United States purchases a certain quantity
of coffee by selling a corresponding quantity of mineral oil,
In seeking to determine the rate of exchange of coffee for
oil, we need not consider the cost of production of coffee in the
United States or of oil in Brazil. Such production may or
may not be possible, but any features, affecting the problem,
which depend on the capacity of each country to obtain
from domestic sources what is procured by importation will
receive due consideration in connection with the cases which
follow. For present purposes, we may be satisfied to treat
such domestic production as out of the question.
If we, for the moment, ignore the cost of transportation,
and consider that each commodity is purchased delivered in
the country in which it is to be used, we have a problem
resembling, in its ‘most important characteristics, that of the
exchange of apples for plums treated in Chapter III. The
trade will be in equilibrium when the rate of exchange of oil
for coffee is fixed at the figure, which gives Brazil as much
oil as she is willing to pay for at that rate, and gives the
United States as much coffee as she is willing to purchase
at that same rate. A higher price of oil reckoned in coffee
would make Brazil's demand for oil smaller, while it would
make the offer of oil by the United States larger than this
rate secures, Thus a higher rate would make the demand
less than the supply in the case of oil from the Brazilians
point of view, and, which is the same fact, otherwise stated,
the supply of coffee less than the demand. A lower rate
would lead to a corresponding inequality of supply and
demand. Each of the commodities is, here, at once supply
and demand. A supply of coffee is offered as the equivalent
of a quantity of oil, which is demanded in return ; while the
coffee is demanded in exchange for a supply of oil. In
practice, many commodities enter into the exchange, and
they are dealt in, not on terms of barter of goods for goods,
but on terms of purchase and sale for the money of the two