APPENDIX

308

for pn of A. But holders of A have to pay an amount gg or
mn of B as delivery charge, and hence receive only Oz for
their own use. Thus the rate of exchange moves unfavourably
for each of the parties to the exchange. Holders of B have
to accept a rate represented by the slope of Op in place of
OP, while holders of A have to accept a rate represented by
the slope of Og in place of OP. The burden of the
obstacle to the exchange is thus divided between the two
parties to the exchange. Special forms of the curves in the
neighbourhood of P may result in some modification of this
general statement. Thus, it may be possible for one of the
exchangers to put the whole disadvantage on the other, or
it may even be possible to derive advantage through such a
change, putting on the other party more than the burden of
the hindrance introduced. To attain such results special
conditions need to be fulfilled, and the study of the shapes
which the curves would need to have, and what would be
implied in giving them these shapes, may be taken as a
profitable exercise by the student. Under ordinary conditions,
 the diagram suggests the probable outcome of the
imposition of new burdens on exchange. The considerations
 here advanced are of special importance in connection
with international trade, and the diagrams of Figs. (vi) and
*vii) may be usefully studied in connection with Chap. XIIL
In connection with problems of taxation, the preceding
discussion might be amplified, or we may revert to the
earlier diagrams for
help in presenting
the conditions of
these problems.
Take the case of a
tax imposed on a
commodity used in
a particular line of
production, or of a
royalty on a process
 of manufacture.
Let Dd be the demand
 curve for the
commodity ultimately
 produced, Ss
the supply curve
before the tax is
imposed. Then the

Fig. {v1