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quickly the commodities were consumed and reproduced.

But further when we regard the equilibriumprice as the average of the varying market-prices, we presuppose constancy in the conditions of demand and supply during the period over which the average is taken. Owing to changes of fashion or taste, the conditions of demand may be continually varying; and owing to changes in the industrial arts, the conditions of supply may be continually varying. Hence it would generally be impossible to determine the equilibrium-price by averaging the variations in market-price during any period of time.

4. Joint and Alternative Demand, Joint and Alternative Supply. — The general theory of distribution and exchange requires us to note that the amounts and prices of different commodities are often very closely connected either through the conditions of demand or through the conditions of supply or both. There are four typical cases in which this dependence is strikingly manifest. These are (1) Joint Demand, (2) Joint Supply, (3) Alternative Demand, (4) Alternative Supply.

The following brief definitions may be given :

:

(1) A demand for “ A and B" is called a joint demand; (2) A supply of "A and B" is called a joint supply: (3) A demand for "A or B" is called an alternative demand; (4) A supply of " A or B" is called an alternative supply. The terms above given are chosen to indicate in each case whether the interconnection comes primarily from the side of demand or from the side of supply. But it will be found in each case that the phenomenon can be regarded from the opposite point of view.

Thus we shall find that,

(1) Joint Demand involves Complementary Supply; (2) Joint Supply involves Complementary Demand; (3) Alternative Demand involves Competitive Supply: (4) Alternative Supply involves Competitive Demand. In the further explanations which follow the relations will be described in an exact form which is often only approximately realised in actual economic phenomena. An ideal simplicity is introduced in order to give greater clearness to the exposition. We shall derive formulæ for each of the four cases separately, but it will be convenient at once to anticipate the results by pointing out the analogies that will be disclosed between the four cases. will be found that in passing from the formula of joint demand to that of joint supply, or from the formula of alternative demand to that of alternative supply, we shall have merely to interchange throughout the terms supply and demand or demand and supply. And again, in passing from the formula of joint demand to that of alternative demand, or from the formula of joint supply to that of alternative supply, we shall have merely to interchange throughout the terms price and amount or

It

amount and price. These symmetrical results will be found helpful in obtaining a general survey of the problems investigated.

In the cases of joint demand and joint supply, we shall find that whereas the amounts of the two constituent articles vary in the same direction, their prices will tend to vary in opposite directions. In the cases of alternative demand and alternative supply, on the contrary, the amounts will vary in opposite directions, while the prices will vary in the same direction.

Joint demand, involving complementary supply. This deals with cases in which things are not demanded separately, but have to be used in conjunction with one another in order to meet the needs of consumers; such as wood and bricks in the building of a house, blades and handles in the manufacture of a knife. The connection here is from the side of demand, while the conditions of the supply of the two factors may be assumed to be independent of one another. The processes of supplying the two factors complement one another, so as to produce a commodity which it is worth while for the ultimate consumers to purchase. Thus the supply-price at which any given amount of the finished article will be offered is the sum of the supply-prices of the several factors which contribute their part in the total productive process. Equilibrium between demand and supply is, therefore, reached at that amount for which the demand-price of the finished article is equal to the sum of the supply-prices of the several factors which co-operate.

Joint supply, involving complementary demand.

cannot be produced separately, but are proThis deals with cases in which things duced together by a single process, such as beef and hides, or wheat and straw. The connection here is from the side of supply, while the conditions of the demand for the two commodities may be assumed to be independent of one another. The two things are produced by the same process, so that the expenses of producing both the things together are the same as the expenses of producing one of them alone. The demands for the two commodities complement one another in making it worth the while of producers to meet the two independent needs. Thus the demand-price at which any given amount of the productive process will be called for is the sum of the demand-prices of the several commodities which are jointly produced in the process. Equilibrium between supply and demand is, therefore, reached at that amount for which the supply-price of the productive process is equal to the sum of the demand-prices of the several articles jointly produced.

Alternative demand, involving competitive supply. This deals with cases in which the same ultimate need can be met by one or other of two commodities equally well, so that either

can be used as an equivalent for the other, or instead of the other, it being understood that the more of the one article is used the less of the other will be in consequence needed. Thus it can be said with approximate accuracy that the demand for non-intoxicating stimulants is an alternative demand for tea or coffee. The connection here, as in joint demand, is from the side of demand, while the conditions of the supply of the two articles may be assumed to be independent of one another. The sources from which the alternative demand is met compete with one another, because the more that is taken from one source the less ceteris paribus will be taken from the other. The simplest possible case of alternative demand, or competitive supply, is that in which precisely the same quality of article is supplied from different sources, as corn from America and corn from Russia. Let us return, however, to the case of tea and coffee, and state the simplest assumptions necessary for regarding the two commodities as strictly alternative in demand. We assume that a certain amount of tea, say 2 lbs., yields always the same utility as a certain amount of coffee, say 3 lbs. Hence the conditions of demand will cause the price of 2 lbs. of tea to be always equal to that of 3 lbs. of coffee, however the actual price and amount of tea and coffee may vary. With these quantities as units, the price of tea is always equal to the price of coffee. Then the supply amount of non intoxicating stimulants which will be offered at any given price is the sum of the supply-amounts of tea and of coffee. Equilibrium between demand and supply is, therefore, reached at that price for which the demandamount of non-intoxicating stimulants is equal to the sum of the supply-amounts of tea and of coffee.

Alternative supply, involving competitive demand. This deals with cases in which the same industry or the same productive agent can be applied to the production of one or of another utility indifferently, it being understood that the more of the one utility is produced, the less of the other can be in consequence produced. Thus it can be said that a piece of land can be applied either to pasture or to other agricultural purposes; or, with approximate accuracy, that the dairy business can be applied indifferently to producing cream or butter; the poultry business to the production either of chickens or of eggs. The connections here, as in joint supply, are from the side of supply, while the conditions of the demand for the two articles may be assumed to be independent of one another. The needs which are met by the alternative supply may be said to compete with one another, because the more is supplied for one need, the less, ceteris paribus, will be supplied for the other. The simplest possible case of alternative supply,

495

or competitive demand, is that in which precisely the same kind of service or product is applied to meet different classes of consumers, as coal for domestic and coal for industrial uses. Let us return, however, to the case of cream and butter, and examine the simplest assumptions necessary for regarding the two commodities as strictly alternative in supply. We assume that a certain amount of cream, say one pint, involves the same expenses of production as a certain amount of butter, with skimmed milk thrown in, say 1 lb. Hence the conditions of supply will cause the price of one pint of cream to be always equal to that of 1 lb. of butter, however the actual price and amount of butter and cream may vary. With these quantities as units, the price of cream is always equal to the price of butter. Then the demand-amount of dairy productions, which will be required at any given price, is the sum of the demand-amounts of butter and of cream. Equilibrium between demand and supply is, therefore, reached at that price for which the supply-amount of the dairy industry is equal to the sum of the demand-amounts of butter and of cream.

The most important problems under the above four heads relate to temporary disturbances in the supply or in the demand of one of the connected commodities. The problem is then to discover the virtual or derived schedule of demand or of supply of the commodity of which the supply or the demand is temporarily disturbed. The following formula will be seen to be of general application :

Joint demand.-If the supply of handles is temporarily disturbed, then, for each several amount of knives, the virtual demand-price for handles the demand-price for knives minus the supply-price for blades.

=

during the financial year. As a vote of credit is demanded to meet unexpected expenditure for undefined services, an estimate is presented of the total sum required, without the detail given in ordinary estimates. Exceptional grants may also be required to defray the cost of imperial undertakings apart from the current service of the year; such as grants for the purchase of the Suez Canal shares, to maintain the dignity of the crown, or to reward its distinguished servants.

Motions and Resolutions.-Motions are proposed in the committee of supply which become, when agreed to, the resolutions of the committee, that the sums specified in each estimate be, for the object therein defined, granted to her majesty during the financial year for which the demand is made. Such a motion, if not by consent withdrawn, must either be refused by the committee, or be accepted, with or without a reduction of the amount therein stated, no increase of a grant, nor modification of its destination, being permitted. resolution of the committee is, upon their report, submitted separately to the consideration of the House.

Each

The resolutions for a money grant of the committee of supply, and of the House, are, however, inoperative, unless the House by another resolution authorises the treasury to draw a sum out of the consolidated fund (see CONSOLIDATED FUND, vol. i. p. 389) sufficient to provide the " ways and means for the payment of the grant. The committee of ways and means is accordingly appointed, at the commencement of each session, simultaneously with the committee of supply, for the consideration of these resolutions; and the chairman of the committee of ways and means acts as chairman of committees of the whole House. In former times the principal duty of this committee was to initiate by their resolutions the taxation that was required to create a sufficiency of "ways and means to meet the annual demands of the crown for the public service. Nowadays, as all the sources of taxation are rendered permanent by statute, except the duty on tea, and the income tax, the control of the committee over taxation is restricted to the consideration of the BUDGET statement made yearly by the chancellor of the exchequer, wherein he explains his calculation of public income and expenditure for the current financial year, and obtains the annual continuance of the tea and income taxes, with such modifications as may to the committee seem expedient. The increase or imposition of taxation, not demanded by the crown, is beyond the power of the committee.

"

As has been previously mentioned, the committee of ways and means is charged with the duty of voting the resolutions which authorise grants out of the consolidated fund "towards

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making good" the grants for the public service resolved upon by the committee of supply, and by the House. It is upon the report of the closing resolution to this effect, which provides the issue of the balance of ways and means required to cover the supply grants voted for the current financial year, that the appropriation bill is brought in. This bill authorises the issue of that balance from the consolidated fund, and enacts-hence the title of the bill— that each grant of supply voted during the session shall be expended on the service for which it has been voted, and to which it is thereby appropriated.

Appropriation Act.-As the treasury cannot touch the consolidated fund save under the authority of an act, and as the appropriation act cannot be passed until the financial business of each session is completed, a process usually ranging over a period of six or seven months, a more prompt issue must be made at the commencement and during the progress of each financial year of the grants voted for the service of the crown. Bills accordingly are passed from time to time during each session, known as consolidated fund bills, which empower the treasury to issue out of the consolidated fund, for the maintenance of the departments for whose use the grants are voted, such sums as they may require in anticipation of the final sanction conferred by the appropriation act.

R. F. D. P.

SUPPLY-CURVES are designed to represent the relation between the price of a commodity and the amount supplied at that price. In the construction which Prof. MARSHALL has made familiar the quantity is measured on the horizontal axis, the corresponding price on the vertical axis. The converse construction is employed by COURNOT.

The simplest species of supply-curve might be constructed thus: "If for the moment we assumed that production depended solely upon the exertions of a certain number of workers, already in existence and trained for their work,' we might "set forth theoretically . . . various amounts of exertion and therefore of production" with "the prices which must be paid to induce the available workers to put forth these amounts of exertion" (Marshall, Principles of Economics, bk. iv. ch. i. § 2, 5th ed., of a "supply-schedule" corresponding to the "demand - schedule" of bk. iii. ch. iii., which may be "translated into a curve"). The matter is not so simple when we no longer suppose production to depend upon the exertions of a given set of workers, but to be affected by the "external" and "internal economies" and the pressure on the resources of nature which may attend production on a large scale, and even by the growth of knowledge, population, and capital (Principles of Economics passim; in particular the footnotes in bk. v. chs. xii. and xiii. and App. H). If now

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for each amount of production we take a point representing the corresponding "normal supplyprice," the locus of these points is the normal, or "long-period," supply-curve.

The relation of this secondary supply-curve, as it may be called (ep. Economic Journal, vol. iv. p. 436), to the primary one at first described is very delicate. According to, Mr. H. Cunynghame, to every point on the secondary there corresponds a primary curve, one of the "successive cost-curves (Economic Journal, vol. ii. p. 41). Attention should be called to Mr. Cunynghame's view that the composition of the demand-curve is exactly parallel to that of the normal supply-curve. The former, he holds, is not "a phenomenon depending on time" (ibid. p. 38). Are we to extend this remark to the parallel case of supply-curves; and to regard the whole series of "successive costcurves" as simultaneous, in the same sense as the parts of an ordinary demand-curve are intended to represent existing co-dispositions ? [Supply-curves of some kind are employed by all the mathematical economists.]

F. Y. E.

Ac

SURENCHÈRE (Fr.). Higher bid. cording to French law, real property offered for sale by auction (à l'enchère) in the course of judicial proceedings is not definitely sold to the highest bidder until a period of eight days has elapsed after the date of the auction. During that period any interested party may make an application to the court for a second auction, accompanied by an offer of a price exceeding at least by one-sixth the highest price-bid at the auction. This offer is called surenchère, and if the price offered by the applicant (surenchérisseur) is not reached the latter must purchase the property at that price or make up the difference. Similar proceedings may take place in the case of a mortgagee selling by private contract, and in the case of a bankrupt's real property being sold by the trustee in bankruptcy, but in these cases the period allowed for the surenchère is somewhat longer, and the amount of the excess is not required to be more than one-tenth.

[Code de Procédure, $$ 708-710, 832-833, 965; Code de Comm., 573; Code Civil, 2185.] T. L.

SURETY. He who becomes bound for another. A surety who discharges the liability of the principal is entitled to assignment of all the securities, if any, held by the creditor (see GUARANTEE).

[De Colyar on Guarantees, London, 1885.]

J. E. C. M.

an

SURPLUS. The effect on price of a short supply of a commodity of such prime necessity as wheat has formed the subject of many speculations, and these have even taken the form of a definite estimate, as in the table given by DAVENANT, of the extent to which

a defect in the harvest may raise the price

The meaning of this is simply that, assuming Jevons's formula to represent the DEMAND CURVES for corn, not merely for prices higher than the average, but for prices below the average, the effects on price of excesses of supply in the degrees named in the first line of figures are given by the corresponding figures of the second line.

It need hardly be stated, however, that there is no special reason for believing that Davenant's data are sufficient to give for our time, even if they should do so for his own, the demand curve for corn. Not only so, but every separate commodity will have its own peculiarities in this respect, so that, were we able to state the numerical connection of enlarged supply with reduced price for the case of corn, the connection could not be held to apply to other important markets.

The extent of the fall of price necessary to carry off an increase of supply will depend on the nature of the commodity and on the extent of its previous use. If the lower price extend its consumption to large classes of the community, a very large increase of supply may take place without greatly disturbing the price after it has fallen to the necessary point to tap the new stratum of consumers.

If, on the other the commodity within the reach of large hand, no ordinary fall of price can thus bring numbers of new consumers, and if, further, the actual consumers have already nearly as much of the commodity as they care to use a state of things by no means inconceivable the lowering of price necessary to dispose of supplies but moderately in excess of the normal may be quite large. If new channels for disposing of the commodity, where its utility is but little below what it had in the uses to which a normal supply was applied, are not discoverable, the surplus may be only disposable in uses where its utility is far below that attained in ordinary uses, and the fall of price be, consequently, large. The whole supply being assumed disposed of in the same market, the price of the surplus will