Value and the Consumer 1

market, sold, price, prices and auction

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This objection or criticism overlooks the fact that virtually all goods are now made to be sold and that there is a definite period during which they must be sold. In the case of the Yankee auction we assumed that the goods must all be sold on a single day and showed that the sale by auction was more effective than a sale by fixed price. A similar assumption can be made with respect to all commodities.

By the economic life of a commodity is meant the period during which it retains its utility and is there fore in demand. The economic life of berries and other fruit is very brief ; they must be sold within a few days after picking or their utility will vanish, a fact which accounts for the bargain prices for fruits on Saturday evenings. The utility of some other goods depends on the seasons, lasting only a few months; hence the bargain prices for summer goods late in August. The utility of yet other goods is due to fashion, and fashion is a capricious goddess; things that please her today have no charm tomorrow.

There are many other reasons wh3r goods must be sold within a definite period. The most important one is the producer's need for the restoration of the capital which he has paid out in the hire of labor and in the purchase of raw materials. His bank will carry him for a time, but that means the payment of interest and is expensive. Whether his goods are perishable or not, he wants back the value which is tied up in them, and he would rather sell at some sac rifice than become too heavy a debtor at the bank.

In some measure, therefore, the consumer holds the whip-hand in the fixing of prices. He is not obliged

to buy any particular article, yet the producer in a way is obliged to sell. For this reason the marginal consumer becomes a personage of exceedingly great importance in any industry.

13. The market price.—Furthermore, in contrast ing the Yankee auction with existing business con ditions, the reader should take note of the fact that in an ordinary market many sellers are competing with one another and that no one of them is able to fix the market price, whereas at the auction there was an apparent lack of competition among the sellers. Ezekiel may have kept the $75 received from his clock, but he may have agreed with the owners of the two other clocks to divide the proceeds of their sale evenly between them.

In a market there are no such agreements and no such differences in price. At any particular time the market price of any commodity tends toward that figure which in the judgment of the shrewdest buyers and sellers will hold the custom of the marginal con sumer. If sales are slower than was expected it is known that the price must be lowered in order that less eager buyers may be brought into the market. On the other band, if sales are unusual in volmne the dealers try an advance of prices by competing with one another, each seeking to sell his entire stock within a given period of time.

Thus market prices are the product of various and conflicting forces and desires, and among these the marginal consumer is one of the most important. The position and power of the producer we will con sider in the next chapter.

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