Dearness Or Cheapness Of Any Commodity Is Regulated By Demand And Supply

The chief fact that determines the dearness or cheapness of any commodity is the relation between the quantity which certain persons require and the quantity supplied by others to meet that demand. If commodities are offered for sale in excess of the quantity which buyers at the time desire to possess, the price falls by reason of the competition between the suppliers, who naturally wish to dispose of their stock (or they would not have brought it to market), and thus bid against each other in the shape of a reduction of price; if people desire to obtain a greater quantity than that which is available at the moment, the price rises in consequence of the competition of the buyers to acquire the stock against each other's biddings.

The Difference Between The Value Of A Commodity And Its Price

It may here be noted that when one thing is measured by another thing in exchange - when, for example, so much corn is exchanged for so much iron - the ratio between the two quantities so exchanged for each other is called the value of each; so much corn is the value of so much iron, and vice versa. But when, instead of expressing the value of one thing in terms of the quantity of another thing which is offered in exchange, we state the quantity of money which would be given, that money is termed (not the value, but) the price of that thing.

Every Producer Is A Consumer

In considering the question of exchange-value (either in the form of commodities for commodities or commodities for money) we must bear in mind the axiom that there cannot possibly be two values or prices for the same article (and the same quality of the article) at the same time and in the same open market. Nor must it be forgotten - as is frequently done in discussions on exchanges - that every producer is concurrently a consumer, so that although a seller of any commodity (at a period of low prices) realises less profit - that is to say, he has less money left in hand after deducting from the price obtained all the charges he has incurred in the production of the article - he benefits as a consumer in its diminished cost. Since no definite understanding or reasoning can proceed unless the terms employed be precise in their meaning and consistently retained to that single sense, I repeat briefly what has already been stated respecting the term money.

Money And Its Representatives As Value Of Goods And Medium Of Exchange: The Credit System

Money in this country is gold, and serves the double duty of measuring the value of goods against each other, and acting also as the substitute or medium of exchange, instead of the actual and direct exchange of the goods themselves. Considering, however, the loss that would ensue by abrasion of coins from friction and constant use were they physically transferred from hand to hand, the place of gold is taken, in exchanging, by paper money - notes, cheques, and bills of exchange - which are simply evidences of indebtedness, and depend for their validity upon the acceptor's feeling of certainty that they will be readily converted into the real money which they profess to represent. Hence credit, or confidence in the character and solvency of the givers of these documents, constitutes the foundation of their acceptance. A failure of credit or trust implies an objection to receive these substituted cheques and bills, and leads to the exaction more extensively of bank-notes in the settlement of obligations, since their discharge in gold is securely protected by the bullion reserve in the Bank of England.

The Part Played By Credit In Extending Or Restricting Business

The element of credit in extending or restricting the range of transactions in business cannot be too decisively impressed upon the reader; and the apprehension of its meaning and action is simple. A tradesman gives credit to his customer in delivering goods without immediate payment, because, from previous dealings with him, and his general reputation, the trader is assured that his character and solvency are guarantees that the money will be paid; he places credit or trust in him (or the buyer receives credit) on account of those experienced qualities. And, similarly, in the wider interchanges of commerce, the characteristic of credit is the deferment of payment in coin by the buyer, - for the accepted cheque may pass from hand to hand before it is presented for discharge to the bank on which it is drawn, and a bill of exchange (as an admitted promise to pay) postpones the actual testing of the giver's capacity to settle until the bill has matured. The credit or faith reposed in a person's honour and financial standing - the two conditions are united in these cases - justifies the seller in parting with goods for a documentary acknowledgment which he feels sure will, at the appointed time, vindicate its expressed reality by the substitution of cash.