APPENDIX

306

corresponds to equilibrium, is not altered by the change of
mode of representation. OzpP is the demand curve, and
OgP the supply curve. At the point of intersection, P, the
amount supplied is ON, and its total price, which is necessary
and sufficient to satisfy producers, is NP. So also NP
represents the aggregate sum which consumers are willing
to offer for the amount ON. The price per unit is represented
by the fraction 3 or the trigonometrical tangent of the
angle PON. We may say, in fact, that the slope of OP
represents the price per unit.
This form of representation in a diagram is adapted to
the problem of
direct exchange
of commodity
for commodity.
Draw pgn an
ordinate cutting
the curves at p
and ¢, and grm
parallel to Oz,
cutting the
curves at ¢ and
# as in the figure.
Then we may
regard each
curve in turn as
a demand or
supply curve,
Each is a supply
curve for one
commodity, a demand curve for the commodity to be secured
in exchange. If the upper curve be supposed to relate to a
commodity A, the lower to a commodity B, then holders
of A are willing to give an amount np of their goods for an
amount Oz of B, while holders of B are willing to accept an
amount 7g of A in exchange for Oz of B. Alternatively,
holders of A are willing to accept an amount m7 of B in
exchange for Om of A, while holders of B are willing to
give an amount mg of B for Om of A. Thus there is an
opportunity for advantage to both in selecting some rate of
exchange intermediate between zg and np of A given for
Or of B, or intermediate between m7» and mg of B given for
Om of A. The enlargement of the scale of exchanges to

x