APPENDIX

313

If, however, PN represent the amount of the produce
yielded by the expenditure ON, the shape of the curve
is not dependent on the price of produce. Variation of
the price of produce causes the slope of the line OCE to be
changed, and consequently changes the position of P and the
length of CP, that 1s to say, modifies the most appropriate
intensity of cultivation and the rent-yielding power of the
land. The relation of price of produce to rent is thus one
in which, though the former has a great influence on the
latter, the converse does not hold (¢f. p. 110). If prices
fall, OCE swings upward towards Oy, and P moves to the
left in consequence, CP decreasing in length. If prices rise,
OCE swings downward towards Ox, P moves to the right,
and CP increases in length. These results depend on the
assumption that the curve, in the neighbourhood of P, has its
concave side facing towards O and the line OCE, If the
proportion of PN to ON decreases as P moves to the right,
and increases as P moves to the left, in the neighbourhood of
the point indicated by making CP a maximum as above, this
will be true. These conditions simply amount to the assumption
 that diminishing returns have become operative before
the stage of cultivation corresponding to the position of P is
reached, and continue to hold for somewhat higher degrees
of intensity of cultivation. It involves no assumption as to
the shape of the curve near O.
If np be an ordinate very close to NP, the tangent at P is
the line P2. Hence, if #p cut OCE in ¢, ¢p is equal to CP.
The product 7p is greater than the product NP, but the whole
of the excess is comprised in the amount by which nc exceeds
NC. The expenditure Oz requires the product zc to compensate
 it. The surplus ¢p is thus not affected. The
additional expenditure N# requires the entire addition which
it secures to the produce to meet the addition to outlay.
The addition to the produce is the marginal product, and its
cost is the additional outlay Nz. Thus the cost of production
 of the marginal output is equal to its value. Changes
in the shape of the curve may be made, modifying the
amount of the surplus, Ze the rent-yielding power of the
land, and altering the intensity of cultivation, without affecting
 the cost of production of the marginal output.
If the produce curve of Fig. (xi) be expressed by the
equation

y=1 @),
the value of y which corresponds to a given value of zis the