APPENDIX

305

such that LP=1p+1p,+ Lg, The points P, determined
in this way, by drawing lines across the diagram at different
levels, trace out the aggregate-supply curve Ss. When the
point of equilibrium is determined by combining Ss.with
the demand curve, the separate supplies of the individual
producers are
determinable, If
P were the point
of equilibrium,
OL would be the
price, ‘LP the
aggregate supply
 at the equilibrium.
 The
individual producers
 would
contribute amounts
 Lg, Lg,
Lp, respectively
to this supply.
As the diagram
is drawn, the
supply curves
correspond to
decreasing returns. It will be noticed that OL represents,
not merely the marginal supply price for the aggregate
supply, but also the marginal supply price for each of the
individual producers.
The problems of demand and supply may be represented
diagrammatically by a somewhat different construction, which
is especially useful in some important cases. We may take
the ordinate of our curves to represent, not the demand price
or the supply price per unit which corresponds to a given
amount of commodity demanded or supplied, but the
aggregate price paid for that amount. In place of representing
 the curve y=/(x), we may represent the curve y =x. f(x),
and so also for the supply curve. This mode of construction
is illustrated in Fig (vi). The curves start from O in this
case, and their intersection P again corresponds to equilibrium,
Since the combination of y=x./(x) and y=x. (2) gives for
the common values the equation
x. f(x) =z. p(x),
it is obvious that the value of z, the scale of supply which

Fig. (v)