ticular use we began to examine. To take a simple illustra tion : a savage finds in a wreck on the coast a number of bars of iron. He and his fellow tribesmen wish them for various purposes : to make arrow heads, spears, knives, hatchets, hoes, ornaments, nails, needles, etc. The value of a bar used to make a knife is in this case derived, in part, through the ulti mate factor, from the alternate uses. Taken jointly and con sidered as one sum, the values of the products account as completely and exclusively for the value of the factor as if they were merged into one product. The factor (F) is dis tributed to each of the products in accordance with the mar ginal principle and therefore the value of the various prod ucts from equal quantities of any factor constantly tends to • The figure shows how the value of a unit of product at a is reflected up to the source, and through successive links to the most distant prod uct z. The effect of this is to reduce the sale of z and correspondingly the use made of the agent in question. A higher price of leather, p", due to the increased use of shoes (f), raises the value of hides and cattle (F) and raises thus the cost of carriage-trimmings, pocket books, footballs, leather belts, and every other leather product (b, c, d, e). As the price rises, substitutes for leather, and imitations of it, are used for such of the products as can not bear the increased cost of leather. As more cattle are raised to provide the leather, the value of meat (p') falls, and likewise soap (g) and oleomargarine (z).
equality. Any unit of product sought for any purpose must be paid for according to a value determined by the costa of the factors under the marginal rule in all the applications. The genosis of the value of ultimate factors is found in the value of the product.
In actual life the problem is far more complex, and yet, through its settlement runs just the same principle. There is constant bidding for factors, and through their prices the claims of rival products are adjusted. A point is reached where it does not pay to use any more of an agent in a certain industry ; the production of another unit results in a loss be cause the factors are worth more in other uses. There is a most complex relation among many different industries using the same factors. Thus in countless ways the values of prod ucts of widely different kinds mutually influence each other. The value of no one is an isolated fact, but is ultimately only the reflection of its relative importance in meeting the desires of men in view of the whole situation.
§ 11. Money cost derived from price of products. Prod ucts compete with each other for the factors that enter into them. According to location, quality of the soil, and im provements, a certain area of land has various rival uses. These uses bid for the land; that is, put in an economic claim for it. Products of a higher value outbid and exclude those of a lower. If fine wine can be raised on a piece of land, potatoes ordinarily will not be planted in it. But if there is such a supply of that quality of land that it continues to be used side by side for both products, it will have the same value and yield the same rental in both uses. The law of indifference applies. The demand for any factor entering
into products is reflected, in an increased price, to its cost in all competing products. Machines are usually made for some product determined in advance, but often they are only partially specialized and within limits they can be adapted. Sewing-machine factories were readily turned to the making of bicycles at the time of greatest demand, and bicycle fac tories later were used for the making of automobiles. Thus, in general, machinery is used for the product in which it can realize its highest value. Any enterprise seeking it for any other use finds its "cost" affected by its various alternative uses. The same is true of all the materials and of all the grades of labor entering into products. The enterpriser's cost is therefore the reflection of the ultimate prices of the productive agents in all its other uses as well as in the par ticular product he desires.
§ 12. Cost an expression of consumers' estimates. It appears that within the limits of monopoly control prices may be fixed without reference to the costs in the particular enter prise. Even a monopoly, however, is limited by costs, in the range of its price fixing. When cost does appear as the limiting influence in the price of a particular product, the cost is itself fixed by a larger group of influences, the demand for the factor in the totality of its uses. Wherever cost asserts itself the enterpriser must bow to the situation, and must conform closely to costs or suffer a loss. The consumer by deciding to buy this or that product sets into motion waves of value. The enterpriser transmits these to the factors. He is the medium through which consumers express their esti mates. The enterpriser who anticipates aright and satisfies the public taste is the good medium. He readily transmits and accurately focuses the rays of public judgment. The enterpriser who misjudges is a poor medium. The one real izes profits, the other incurs a loss.
Norm On other meanings of profit. It is well to note for caution's sake other loose uses of profit as any gain or advantage secured by any means in business. In retail business it has the meaning of the gross gain on a given sale, the excess of the selling price over the price at which the merchant bought it from manufacturer or wholesaler. Let us call this sale-profit. Buying an article for one dollar and selling it for two dollars, is said by the merchant to be selling at 100 per cent profit, jocularly called, "The Dutchman's one per cent." In different lines of goods there is added regularly to this cost 20, 30, or 50 per cent, as the case may be, as the merchant's profit on the sale. Sale-profit leaves out of account rent, interest on capital, clerk hire, freight, and many other minor items that enter into the cost of running a store. It often happens that the Dutchman's way of reckoning is near the truth, and that the sale-profit of 100 per cent leaves at the end of the year hardly 1 per cent of the sales as a true income to the merchant. This meaning is sometimes developed to a yearly sales-profit, the sum of all the sepa rate sale-profits within a year, or the difference between the wholesale and retail prices of goods sold within the year.