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Principles of economics (13th Jan 23 at 1:25am UTC)
Let us consider the conditions under which the price of a thing whose supply is so reduced, and whose demand is not for direct use, but as a factor of production of a commodity, may be raised steeply. The first condition is that the element is necessary, or almost necessary, for the production of the commodity, since no adequate substitute is available at a reasonable price. The second condition is that the good (the factor being one of the factors necessary to produce it) is a good with little elasticity of demand, so that a reduction in its supply will make consumers willing to pay a higher price rather than go home empty-handed; This, of course, includes the condition that the appropriate product of the commodity cannot be bought at a price slightly higher than its equilibrium price: if the decline in house construction raises house prices significantly, builders eager to make extra profits will bid up each other to buy the available plasterer's labour in the market. The third condition is that the price of the factor is only a small part of the cost of producing the commodity. Since the plasterer's wages are only a small part of the total cost of building a house, even a 50% increase in wages would increase the cost of the house by only a small proportion,Nail machine supplier, thus providing little control over demand. The fourth condition is that even a slight reduction in the quantity demanded will cause the price of the supply of other factors of production to fall considerably; for this will increase the margin used to pay a high price for that factor. For example, if bricklayers and other workers or employers cannot find other work and cannot afford to be idle, they may be willing to work for much lower pay than before, which will increase the difference used to pay higher wages to plasterers. These four conditions are independent, while the results of the last three conditions are cumulative. If it were possible to do the work without plastering or to hire someone outside the plastering industry at a low price,wire nail making machine, the increase in the wages of the plasterer would be limited. In some cases, the oppression of a factor of production of a commodity on other factors through the action of derived demand is mitigated by the principle of substitution. In addition, serious difficulties in obtaining one of the factors of production of the finished product can often be overcome by changing the nature of the finished product. Some of the plasterer's labour may be indispensable; but people are often in doubt as to how much plastering is worth in a house, and if its price rises, they will use less. The strength of that satisfaction which they lose by using a little less whitewash is its marginal utility; and the price which they are just willing to pay for the use of it is the real demand price of the work of the plasterer for that use. The same is true of the associated demand for malt and hops in the case of ale. But their proportions can change. Ale which is distinguished from other ales only by its higher content of hops commands a higher price. This price difference represents the demand for hops. The relations between the plasterers and the bricklayers, and the like, have given full expression to that instructive and romantic phenomenon in the history of the union and struggle of the trade unions of similar trades. But the vast majority of the cases of associated demand are cases of demand for a raw material and workers to process it; for example, cotton, Nail machine supplier ,Iron Nail Making Machine, hemp, copper, or iron, and workers to process these raw materials. Moreover, the relative prices of different kinds of food vary greatly according to the supply of skilled labour by the cooks: whereas, for example, parts of many kinds of meat and vegetables are almost worthless in the United States, where skilled cooks are scarce and well paid, they can have a moderate value in France, where cooking techniques are widely divergent. The third section is compound demand. We have already discussed how the total demand for any good is made up of the demand of the different groups that need it. But now we can extend the concept of compound demand to the necessities of production required by several groups of producers. Almost every kind of raw material and almost every kind of labour is used in many different branches of industry to produce many different kinds of goods.
Each of these commodities has its own immediate demand; from that demand there can be derived a derived demand for whatever is used in its production, and this thing is "distributed among its various uses," in the manner we have described; these various uses are in competition with each other; and the corresponding derived demands are competing demands. But in their relation to the supply of the product, they co-operate, "compounding" the total demand of the exhausted supply, just as the partial demands of several social classes for the finished product are added together to compound its total demand. Section 4 Associated Supply. Derived supply price. Now we can consider associated products: that is to say, they are not easily produced by themselves; they coexist in the same source, and therefore have an associated supply, as with beef and cowhide, or wheat and straw. This situation is consistent with the situation of those things with associated demand, which can be discussed in almost the same terms by replacing "demand" with "supply", and vice versa. Just as there is an associated demand for those things which are used in common for the same purpose, there is also an associated supply of those things which have the same source. A single supply from the same source can be divided into many derived supplies of those things from it. For example, since the abolition of the Grain Act, most of the wheat consumed in Britain has been imported from abroad, without any straw of course. This led to a shortage of wheatgrass, and the price of wheatgrass rose accordingly. Wheat farmers expect to get most of the crop's value from wheat straw. It can be seen that the value of wheat straw is higher in wheat importing countries and lower in wheat exporting countries. Similarly, in the wool regions of Australia, the price of mutton is sometimes very low. When the wool is exported, the mutton is kept for domestic consumption; because the demand for mutton is not great,Nail Making Machine manufacturers, the price of wool has to cover almost all the common production costs of meat and wool. Later, the low price of meat stimulated the development of the meat processing and export industry, and now the price of meat in Australia is higher than before. 3shardware.com
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