308 NATURE OF CAPITAL AND INCOME [Crar. XVII

In the special case in which there is but one item of cost
and one item of income, the curve is reduced to that shown
in Figure 17, where a is the expected income, and a’ the

 

a'
b re
c'

 

 

 

Fre. 18.

past outgo. If the capital-value AB be taken at a point
midway between the income and outgo, it evidently fol-F—r—"1


at
—G

 

 

I
cn

 

1

beer ama

Fic. 19.

lows, by the nature of the discount curve, that the ratio
of a’ to AB is the same as the ratio of AB to a, or that

a"

w

=
=<

Fia. 20.

AB is the “mean proportional,” or “geometric mean,”
between a and o/. In other words, the normal relation
between cost, capital, and return is expressed in the state-