Political Economy for the People

7. In commodities, the value of which arises from the scarcity, that value is determined by the offers of rival competitors. Of this character are those articles which cannot, like those of the first class, be indefinitely multiplied, or, perchance, be increased at all, as paintings by old masters, antique sculptures, coins medals, or manuscripts; and so, of any other rare product of art or nature.

8. Of such articles, the owner has the monopoly, or sole right of sale, which is more or less exclusive, according to the scarcity. Monopolies of articles liberally consumed, and susceptible of an abundant production, are sometimes granted by arbitrary governments, and sometimes they may be, in any country, the result of fortunate accident. The exclusive rights which are, for a time, conferred on authors and inventors, are monopolies created by law. In all these cases, the monopolist having the power of fixing his own price, and knowing that the extent of his sales will be inversely as the price, will choose between the alternatives of selling a less quantity at a high price, or a large quantity at a low price. The demand he has no means of influencing except by the price.

9. In both classes of commodities, whatever may be the price at any one time or place, that price is liable to fluctuation by reason of an alteration in the supply or the demand, that is to say, in the relation between them; for if the same alterations take place both in the supply and the demand, whether by increase or diminution, then the price will not be affected.

10. By the supply of a commodity is meant, not the whole quantity of it in the community, but only that portion which is offered for sale in the market, or ready to be so offered: such are the shoes in the shops of the shoemakers and others; the hats and other fabrics in the appropriate places of sale; the provisions of different kinds in the stores of their respective dealers.

11. By the demand of a commodity is meant the desire to possess it, combined with the means of purchasing it, to which may be added the will to use the means. The desire of a poor man for a costly luxury has no influence on its price, and the desire of a rich miser may be as unavailing as that of a beggar.

12. Every addition to the supply -- the demand continuing the same -- tends to lower the price, since it is only by a reduction of price that the additional quantity can be generally sold. A diminished demand, producing the same relative change as an increased supply, has the same lowering effect.

13. A diminished supply, on the other hand, or an increased demand, tends to raise the price, since it is only by giving a higher price that the quantity desired can be certainly obtained. The rise of price is sometimes the effect of competition among the buyers, and sometimes the result of the sagacity of the sellers, who raise the price in anticipation of the increased competition of the buyers.