Wealth of Nations Book 1 Chapter 7

Chapter 7 - Of the Natural and Market Price of Commodities

definitions

natural Price

when price of commodity perfectly covers the rent, wages and profits needed to produce it.

market price

the actual price for which any commodity is sold

effectual demand

demand for commodity at it's natural price

• Market prices deviate from natural price in response to supply and demand
• monopoly, legislation, trade secrets can all effect supply and demand and thus the market price
• changes in market prices fall mainly on wages and profit. Not as much on rent.