are acted upon by demand and supply. It must be borne in mind that the price in the case of all these commodities is adjusted in such a way as to equalise the demand with the supply.

In the case of the first class of commodities, those whose supply is absolutely limited, the supply is made equal to the demand by raising the price to such a point that the demand exceeding the supply is withdrawn.

In the case of the second class of commodities, whose supply cannot be increased without increasing cost of production, the demand (owing to the great proportion of this class being composed of the necessaries of life) cannot be greatly reduced: when therefore the demand is in excess of the supply, the supply must be increased. This cannot be done without increasing the cost of production, and in order to recompense this increased exertion of labour and capital, prices rise.

In the case of the third class of commodities, whose supply can be indefinitely increased without increasing their cost of production, when the demand is in excess of the supply, prices rise, and a portion of the demand is withdrawn; but this manner of equalising the demand to the supply is only temporary; when the price of a commodity rises above what is necessary to provide the current rate of wages and profits to its producers, production is greatly stimulated. This increased production increases the supply, and prices fall; the adjustment of the supply to the demand ultimately taking place by means of an increased supply.

Having now investigated the causes which regulate the prices of the three classes into which commodities are divided, the next chapter will be devoted to an explanation of the value of money.

QUESTIONS ON CHAPTER III. The Value of Commodities.

I. Into what classes are commodities divided in relation to their value?

3. What are the principal elements of cost of production as stated by Mr Mill?

4. What other definition has been given by Prof. Cairnes of cost of production?

5. What is the accurate explanation of the expression "that prices depend upon demand and supply"?

6. Give an illustration of the manner in which the adjustment of prices equalises demand and supply.

7. Explain the manner in which the tendency is exerted to make the market price of a commodity approximate to a sum just sufficient to yield the current rate of wages and profits to the labourer and capitalist who produce it.

8. This approximation takes place only when the supply of the commodity can be increased. In what manner is the price of those commodities adjusted, the supply of which is absolutely limited?

9. What is "effectual demand”?

10. By what two qualities is every article characterised which has an exchange value?

II.

12.

Are these qualities always present in the same degree?
Give illustrations.

13. Which quality is the more active in determining the price of such a commodity as one of Raphael's pictures?

14. What are the principal of the commodities which become more expensive as their supply is increased?

15. Shew, by an illustration, the operation of the causes by which an additional supply of food must be produced at a greater proportionate expenditure of capital and labour.

16. What causes a demand for an additional supply of food?

17. What circumstance therefore has a stronger tendency than any other to increase the price of food?

18. How is this tendency sometimes counteracted ?

19. Mention some other commodities which are subject to the same laws as those which regulate the price of agricultural produce.

20. Name the last of the three classes into which commodities are divided in respect to their value.

21.

Are the laws which govern the price of manufactured commodities the same as those which regulate the price of agricultural produce?

22. Explain the reason of the difference existing between them.

23. Illustrate the manner in which the price of manufactured commodities is sometimes decreased when the supply is augmented.

24. In what manner does efficiency of labour act upon cost of production?

25. What is the connection existing between wages, profits, cost of production, and prices?

26. Shew by an illustration that, under certain circumstances, profits and wages can both be raised without increasing prices.

27. What practical conclusion can therefore be drawn respecting the connection of prices with the rate of profit and the wages of labour?

28. When there is a general increase of efficiency of labour and capital, in what way do labourers, capitalists and consumers benefit?

29. Give a summary of the laws which regulate the price of articles of vertu, agricultural produce, and manufactured commodities.

I. If the poor people took to eating grass, could the baker increase the size of his penny loaf?

2.

What view of cost of production is taken by Hood in the lines:

"Oh men with sisters dear, men with mothers and wives!

It isn't linen you're wearing out, it's human creatures' lives."

3. If the cost of producing food remains the same, what will be the effect if the population of England goes on doubling itself every 60 years?

4. If a machine is invented that greatly facilitates the production of a particular commodity, do you think the

inventor should take out a patent for it. and thus secure the advantages to himself instead of allowing, by the effect of competition, the consumers of the commodity to obtain all the benefit of the invention ?

5. It has been said that the demand for a thing influences the price of it. Does the desire of a pauper to have a carriage influence the price of carriages? And if not, why not?

6. Supposing that all the members of my household decline to eat American meat, will the importation produce any effect on my butcher's bills?

7. Suppose meat were cheaper, and my butcher's bills were consequently reduced one-third, should I be permanently any better off, if about the same time I had nine people to keep instead of six?

CHAPTER IV. On the Value of Money.

It is not at all an uncommon thing to hear people talk about the price of money. This expression is very often used respecting the rate of interest; when those who borrow money have to pay for the loan a large sum over and above the amount they receive, the price of money, or the rate of interest, is said to be high. When borrowers only pay a small sum for the use of the loan the price of money, or the rate of interest, is said to be low. It will, however, be shewn that, apart from its commercial signification, the expression "the price of money" has no meaning whatever. It has been said in a former chapter that the value of a commodity is its exchange power, or the number of other commodities for which it will exchange. It was then explained that price is a particular case of value, that is, the value of a commodity estimated in money. When therefore the price of money is spoken of, in any other sense than that indicated above, it is equivalent to mentioning the value of money estimated in money. This is, of course a foolish expression; it might as well be said that the price of ten pounds was ten sovereigns, or that the price of a shilling was two sixpences.

It is impossible to measure the value of a commodity by comparing it with itself.

The value of Money. The value of money is its exchange power: when money exchanges for a large quantity of other commodities, or in other words, when prices are low, the value of money is high; when money exchanges for a small amount of other commodities, or in other words, when prices are high, the value of money is low.

The value of Money is regulated by the same laws as those which determine the value of other mineral produce. It is sometimes erroneously supposed that the value of money is invariable, because an ounce of gold can always be exchanged for the same amount of money. Whether prices are high, or whether they are low, an ounce of gold can always be exchanged at the Mint for £3. 175. 10ld. Those who think that this fact proves the value of gold to be unalterable would also be likely to believe that the value of land is unchangeable, because an acre of land can always be divided into four plots of a quarter of an acre each. The fact that an ounce of gold will always exchange for £3. 175. 10 d. only shews that an ounce of gold will divide into three sovereigns and that part of a sovereign which is represented by 17s. 10 d.

It must be borne in mind that the value of the precious metals is regulated in the same manner as the value of other mineral products. The value therefore of the precious metals is adjusted by an equalisation of the demand with the supply. As the demand increases the value rises, and the production of an increased supply is also stimulated. If this increased supply is obtained from less productive sources, the cost of production will be increased and the value of the precious metals will be augmented. If however the increased supply is obtained by the discovery of more productive mines, the cost of production will be reduced and the value of the precious metals will diminish. The yield of silver from America has of recent years been enormously increased owing to the discovery of very productive mines. From the years 1849 to 1858, the yield of silver from American mines was of the value of