in the theory of value and prices. 27

ONE COMMODITY—ONE PRODUCER.

The definitions of utility in Chapter I apply also to negative util-ity or disutility. Corresponding to all that has been said relative toconsumption are analagous remarks for production. 3 .

Thus we may construct a disutility curve and cistern(fig. 3) marginal disutility (O R) being measuredupward from the origin. If utility be measured inmoney as in the last section, O A represents theminimum price at which the individual will producethe commodity, O R the current price and the shadedarea (or the cubic contents behind it) the output. “ E

The marginal disutility of production is here represented as de-creasing as the amount of the product increases. This assumes a“law of diminishing returns.” It is true that this law is seldom ifever rigorously true when applied to small amounts ; that is, thecost or disutility of producing the first unit is not less but greaterthan that of producing the second. Rut the marginal disutility con-tinues to decrease only up to a certain point, after which it increases.This is usually true even of manufacturing. American bicycle fac-tories are now running behind their orders. If they attempted torun their factories at a higher velocity the cost of the additionalproduct would become greater than its price. In general at theactual rate at which a concern produces, the law of increase of dis-utility applies.

It would be possible by looping the curve MN near the bottom tomake a cistern of such a form as to represent correctly both the lawof decrease and increase, but as we are chiefly concerned with thepoint of equilibrium and as at equilibrium the law of increase usuallyapplies such complicated curves are not here drawn.

If a producer has such a productive capacity as to consciously in-fluence prices by a variation of his product, he may find his maxi-mum gain by restricting his output even at a point where the law ofdecreasing disutility applies ; for if he should extend his production,his pi-ice might decrease faster than his cost.

These considerations together with the important one that in aproductive enterprise the expenses are classified as “fixed” and“ running,” make many interesting cases of instability and indeter-minatenebs and lead to the discussion of monopolies, combinations,rate wars, etc., etc. These each require special analysis. In the