THE PRICE OF PRODUCTS. I. THE SUPPLY-INDEX OF COSTS
There are markets for two sorts of products: markets for final products ready for use and for intermediate products which are those of higher orders, demanded that by their aid final products of immediate ultimate usefulness may be obtained. For the immediately useful, final products, the demand is created by the consumers; for the intermediate products, by the producers.—"Producers" is again used in the widest sense, which includes trade with all its auxiliary employments.—The producers' demand for intermediate products originates in the expectation that a demand by consumers will completely relieve the market of the ultimate products which are to be obtained by the use to the intermediate goods. The standard of producers' demand, therefore, is to be found in the prices at which they expect to dispose of the ultimate products. From the prices thus expected for ultimate products, the producers by the aid of the rules of attribution, compute the indices of demand for the intermediate products. On the basis of these indices the prices for producers' goods are calculated. We may confine ourselves to deducing the law of price for the decisive market of the ultimate products. As to the
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price-formation for intermediate products we shall later, especially when discussing demand-monopoly, add a few remarks. In the following pages, when we employ the term, products, we mean to refer —unless otherwise expressly indicated-to the immediately useful ultimate products.