it, we should have to ascertain how much of it he would be willing to purchase at each of the prices at which it is likely to be offered; and the complete circumstances of his demand for, say, tea can be best expressed by a SCHEDULE of the prices which he is willing to pay; that is, by his several Demand-Prices for different amounts of it.

Thus for instance we may find that he would buy

6 lb. at the price of 50d. per lb.

If corresponding prices were filled in for all intermediate amounts we should have an exact statement of his demand1.

1 Such a demand schedule may be translated, on a plan now coming into familiar use, into a curve that may be called his DEMAND CURVE. Let Ox and Oy be drawn the one horizontally, the other vertically. Let an inch measured along Ox represent 10 lb. of tea, and an inch measured along Oy represent 40d,

We see then that a person's demand for a thing is indeterminate, so long as nothing is said as to the price at which the thing is to be had; and an increase in his demand for it means an increase throughout the whole schedule in the prices at which he is willing to purchase different amounts of it. We may sometimes find it convenient to speak of this as a raising of his demand schedule1.

§ 5. So far we have looked at the demand of a single individual. And in the particular case of such a Demand of a thing as tea, the demand of a single person is market. fairly representative of the general demand of a whole market: for the demand for tea is a constant one; and, since it can be purchased in small quantities, every variation in its price is likely to affect the amount which he will buy. But even among those things which are in constant use, there are many for which the demand on the part of any single individual cannot vary continuously with every small change in price, but can move only by great leaps. For instance a small fall in the price of hats or watches will not affect the action of everyone, but it will induce a few persons, who were in doubt whether or not to get a new hat or a new watch, to decide in favour of doing so.

In large markets, however, where rich and poor, old and young, men and women, persons of all varieties of tastes, temperaments and occupations are mingled together, every fall, however slight, in the price of a commodity in general use, will, other things being equal, increase the total sales of

m1 being on Ox and m1p being drawn vertically from m1; and so for the others. Then P1P2....Pg are points on his Demand Curve for tea; or as we may say DEMAND POINTS. If we could find demand points in the same manner for every possible quantity of tea we should get the whole continuous curve DD' as shown in the figure.

1 Geometrically it is represented by raising his demand curve, or, what comes to the same thing, moving it to the right, with perhaps some modifica. tion of its shape.

For some discussion of the uses of the term Demand by Mill and Cairnes, see Principles III. III. 4.

it; just as an unhealthy autumn increases the mortality of a large town, though many persons are uninjured by it.

The

Let us however return to the demand for tea. aggregate demand in the place is the sum of the demands of all the individuals there. Some will be richer and some poorer than the individual consumer whose demand schedule we have just written down; some will have a greater and others a smaller liking for tea than he has. Let us suppose that there are in the place a million purchasers of tea, and that their average consumption is equal to his at each several price. Then the demand of that place is represented by the same schedule as before, if we write a million pounds of tea instead of one pound'.

Law of Demand.

There is then one LAW OF DEMAND, which is common to all demand schedules, viz. that the greater the amount to be sold, the smaller will be the price at which it will find purchasers; or in other words, that the amount demanded increases with a fall in price, and diminishes with a rise in price.

There will not be any exact relation between the fall in price and the increase of demand. A fall of one-tenth in the

price may increase the sales by a twentieth or by a quarter, or it may double them. But as the numbers in the lefthand column of the demand schedule increase, those in the right-hand column will always diminish.

ข

1 The demand is represented by the same curve as before, only an inch

measured along Or now represents ten million pounds instead of ten pounds. And a formal definition of the Demand curve for a market may be given thus:-The demand curve for any commodity in a market during any given unit of time is the locus of demand points for it. That is to say, it is a curve such that if from any point P on it, a straight line PM be drawn perpendicular to Ox, PM represents the price at which purchasers will be forthcoming for an amount of the commodity represented by OM.

The price will measure the Marginal Utility of the commodity to each purchaser: but as the purchasers are likely to be some rich and others poor, we cannot speak of price as measuring Marginal Utility in general, but only with reference to some individual purchaser'.

1 It must be remembered that the demand schedule gives the prices at which various quantities of a thing can be sold in a market during a given time and under given conditions. If the conditions vary in any respect the figures of the schedule will probably require to be changed; and this has constantly to be done when the desire for anything is materially altered by a variation of custom, or by a cheapening of the supply of a rival commodity, or by the invention of a new one. For instance, the demand schedule for tea is drawn out on the assumption that the price of coffee is known; but a failure of the coffee harvest would raise the prices throughout the demand schedule for tea, and again the demand for gas is liable to be reduced by an improvement in electric lighting.

These and some similar points are further discussed in Principles III. III. 6.

CHAPTER IV.

LAW OF DEMAND, CONTINUED.

Elasticity of demand

ELASTICITY OF DEMAND.

$ 1. WE have seen that the only universal law as to a person's desire for a commodity is that it diminishes, other things being equal, with every increase in his supply of that commodity. But this diminution may be slow or rapid. If it is slow the price that he will give for the commodity will not fall much in consequence of a considerable increase in his supply of it; and a small fall in price will cause a comparatively large increase in his purchases. But if it is rapid, a small fall in price will cause only a very small increase in his purchases. In the former case his willingness to purchase the thing stretches itself out a great deal under the action of a small inducement : the elasticity of his demand, we may say, is great. In the latter case the extra inducement given by the fall in price causes hardly any extension of his desire to purchase: the elasticity of his demand is small.

And as with the demand of one person so with that of a whole market. The ELASTICITY OF DEMAND in a market is great or small according as the amount demanded increases much or little for a given fall in price, and diminishes much or little for a given rise in price'.

§ 2. The price which is so high relatively to the poor man as to be almost prohibitive, may be scarcely felt by the rich; the poor man for instance never tastes wine, but the very rich man may drink as

varies with different

incomes.

1 A mathematical device for measuring elasticity is given in Principles III. IV. 1.