What the nature of those wants should be in order that any particular man may get the greatest joy out of living is a problem which each man must work out for himself. The economist merely calls attention to the fact that the continued gratification of any par ticular want gives less satisfaction than could be got out of the satisfaction of a variety of wants.
If the object of living is to get the greatest possible satisfaction out of life, a man must give most careful heed to the expenditure of his income. If he is reckless in its use, he may satisfy certain wants ex cessively and become the victim of the law of diminish ing utility, or he may expend such a large amount of his income in the purchase of articles that give tem porary pleasure that he will be compelled later to forego the possession of articles which in the long run would give him greater satisfaction. Evidently from this point of view what is luxury for one man is only a common comfort to another of larger income.
So we may say that a man indulges in a luxmy when he satisfies a want at an expense so great that lie is later on compelled to forego the satisfaction of more important wants. An automobile, for example, is a luxury to any man if its purchase price compels him to withdraw his son from school to take the place of a hired man.
Thus the word luxury is used in two distinct senses. First, to mean any wasteful, foolish, uneconomic in dulgence which leads later to the pain of sacrifice; second, to designate certain articles which are popu larly regarded as not being necessarY for the main tenance of the ordinary comforts and decencies of life.
4. Productive convenience all forms of consumption which have for their end the creation of more wealth the economists call produc tive consumption, and the goods consumed as a re sult of the productive process are regarded as pro ducers' goods. In the strictest sense all consumption is productive of psychic income or satisfaction, but in economics consumption is called productive only in so far as it leads to the increase of utilities in the form of material goods.
Men are said to spend their incomes unproductively when they consume wealth merely for the sake of pleasure and enjoyment. Gasolene is burned unpro
ductively in a pleasure motor boat or in a joy-ridden automobile, but productively when burned in a com mercial truck or in an engine for pumping water.
5. Elasticity of are many articles the demand for which does not increase much even tho the price be greatly lowered. As a rule the cost of these articles is so low that most people are able to possess a supply sufficient to satisfy their needs. Salt and matches are typical commodities of this kind. If the price of salt or of matches should decline 50 per cent, it is not likely that the consumption of either would greatly increase. The demand for such ar ticles is called inelastic, since it does not vary greatly in response to changes in price.
On the other hand, there are many articles the de mand for which is very responsive to changes of price. Any decline in the price of silk, for example, almost inevitably leads to an increase in consumption. If silk could be made as cheap as cotton the demand for it would increase great13-, and the demand for cotton goods would probably suffer diminution. The development of the automobile industry proved the existence of an unsatisfied potential demand for au tomobiles, which became a real economic demand as the prices of automobiles came down. The demand for articles of this kind is said to be elastic.
6. Iniportance to producers.—To the producer elasticity of demand is a most important matter. Jf he is manufacturing an article for which the demand is inelastic, such as matches, pen points, lead pencils, he must beware of over-stocking the market, for then he may have to sell his goods at less than their cost of production. A wise producer makes a study of the market for his commodity and is able with con siderable accuracy to forecast the amount that it will absorb at a price which he regards as fair. The pro ducer of articles for which the demand is elastic must study his market, but he is in less danger; if he over estimates the market's absorbing power and produces more than he can sell at the expected profit, a slight decline of price will induce larger consumption.