Value and the Consumer 1

price, clock, buy, auction, sold, desire, willing and pay

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It follows, therefore, that many of us are able to buy articles at prices lower than we would be willing to pay if necessary. Many people get milk at ten cents a quart who would buy just as much at twenty cents a quart if that were the market price. But the Imarginal consumer keeps the price at the lower figure, for if it is advanced he stops buying and the product is not sold. Many of us would buy as many lead pencils at ten cents apiece as we now buy at five, but the marginal consuming class of buyers forbids the advance; if it were made they would stop buying and the whole product could not be marketed.

( Thus it happens that the prices or values of articles in the market, in so far as they are determined by the will and desire of purchasers, represent the intensity of the desire of the marginal consuming classes and not the average of the total desire for the article. Hence most of us are able to obtain with our money the en j oyment of goods for which we would be willing to pay a higher price if we had to. If a man is willing to pay a dollar for an extra pair of suspenders but is able to buy them for fifty cents, he is evidently getting a dollar's worth of satisfaction at half price.

Economists call this unpaid-for satisfaction the consumer's surplus. It may be defined as follows : That part of a consumer's satisfaction or enjoyment which is more than sufficient to compensate for the sacrifice necessary to obtain it.

The marginal consumer gets no surplus. He is barely compensated for the sacrifice he makes. All above him who desire the article more intensely or who have more ample means to purchase, are assumed to get more satisfaction than they really pay for.

11. A Yankee auction.—An auction is a device adopted by the seller to circumvent the law of dimin ishing utility and destroy the consumer's surplus. In a market uniform prices prevail. A seller cannot ask a high price of one buyer and a low price of another unless he is willing to lose standing among bis cus tomers. But at an 'auction the buyers are shrewdly put into competition with one another and out of each buyer is coaxed the price which he is willing to pay.

In rural districts, especially in -New England, auctions of household goods and farm implements always attract crowds from many miles around, some intending to buy, others seeking diversion. When a farmer advertises an auction of his property, his neighbors sometimes utilize the auction to dispose of surplus furniture and china, having discovered that in this way they can get better prices than if they ,try to sell their stuff at a fixed price.

Let us suppose that Ezekiel Jones announces an auction of his household belongings and that a grand father's clock is listed on the bill. Let us suppose also that three men go to that auction with their minds made up to bid for that clock. One has been urged by his fiancee to buy it for their new home, and he has resolved t6 bid up to $75 rather than not get it. The wife of the second has expressed a desire for it and lie has fixed the limit of his bidding at $50. The mother-in-law of the third has expressed a desire for the clock and lie has resolved to bid at least $25 for it.

So when the clock is brought forth the third man starts the bidding at $10; the second raises him .to $15, and the first goes up to $20. The first goes to $25, then drops out as the two other bidders push the price on up to $50; then the second man drops out, and the first man has no competition except perhaps the bidding of a shrewd confederate of the auctioneer, who may push the price up to $75, at which the clock goes to the man who wants to please his sweetheart.

Half an hour later, let us suppose, a second clock is brought forth, just like the first. Again there is lively bidding, but the man who has bought a clock takes no part. To his disgust he sees the second clock, which is quite as fine as his own, knocked down at $50. Then suppose that half an hour later a third clock of the same sort is brought out. There is only one man in the crowd who wants it, but by the aid of the auctioneer's confederate he may be forced to bid up to $25.

Thus the three clocks are sold for a total of $150, whereas if they bad been price-marked and sold as in a market, each having the same price, that price could not have been above $25, for at a higher price only two of the clocks would have been sold. In this and in other ways a shrewd auctioneer can always earn his fee.

12. Economic life of reader may object to the foregoing illustration as not being pertinent because the farmer might have priced the three clocks at $50 each, sold two of them, and then have taken in more money than by selling all three at $25 apiece. He might better, it will be said, have sold two clocks at $50 apiece and kept possession himself of one clock.

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