of money). The chief factor on which the conditions of supply
depend is the cost of production (again as measured in terms of
money). The prevailing trend towards an equilibrium of demand and
supply can thus be expressed as follows:--

LAW VI. A commodity tends to be produced on a scale at which its
marginal cost of production is equal to its marginal utility, as
measured in terms of money, and both are equal to its price.

CHAPTER V

JOINT DEMAND AND SUPPLY

Sec.1. _Marginal Cost under Joint Supply_. Several references have been
made above to joint products, a relation which it will be convenient
now to describe as that of Joint Supply. Our sense of symmetry should
make us look for a parallel relation on the side of demand; and it is
not far to seek. There is a "joint demand" for carriages and horses,
for golf clubs and golf balls, for pens and ink, for the many groups
of things which we use together in ordinary life. But the most
important instances of Joint Demand are to be found when we pass from
consumers' to producers' goods. There, indeed, Joint Demand is the
universal rule. Iron ore, coal and the services of many grades of
operatives are all jointly demanded for the production of steel; wool,
textile machinery and again the services of many operatives are
jointly demanded for the production of woollen goods (to mention in
each case only a few things out of a very extensive list). Now we have
already noted that, when commodities are jointly supplied, there is an
obvious difficulty in allocating to each of them its proper share of
the joint cost of production. There is a similar difficulty in
estimating the utility of a commodity which is demanded jointly with
others. Thus, the utility of wool is derived from that of the woollen
goods which it helps to make. But the utility of the factories, the
machinery and the operatives employed in the woollen and worsted
industries is derived from precisely the same source. How much, then,
of the utility of woollen goods should be attributed to the wool and
how much to the textile machinery? Can we make any sense of the notion
of utility as applying to one of these things, taken by itself? And,
if not, how can we explain the price of a thing like wool in terms of
utility and cost, since we cannot disentangle its cost from that of
mutton, nor its utility from that of a great variety of other things?

Here the conception of the margin enables us to grapple with