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.