a much larger income to spend,
she might buy larger quantities of practically every commodity; and,
though she would obtain a greater total utility thereby, the marginal
utility she would obtain in each direction would be smaller, in
accordance with the law of diminishing utility. The prices might not
have changed; the respective marginal utilities to her of the
different things would again be proportionate to their prices, but
they would constitute a smaller satisfaction than before.

Thus we can only say that the prices of commodities will be
proportionate to their real marginal utilities, when we are
considering the different purchases of one and the same
individual. The amounts of money which different people are prepared
to pay for different consumers' goods are no reliable indication of
the real utilities, the amounts of human satisfaction which they
yield. Here we must take account not only of varying needs and
capacities for enjoyment, but of the very unequal manner in which
purchasing power is distributed among the people. The cigars which a
rich man may buy will yield him an immeasurably smaller satisfaction
than that which a poor family could obtain by spending the same amount
of money on boots, or clothes or milk. When, therefore, we compare
commodities which are bought by essentially different consuming
publics, their respective prices may bear no close relation to their
_real_ utility, whether marginal or otherwise. Thus the law of
diminishing utility applies to money or purchasing power, as well as
to particular commodities. The more money a man has the less is the
marginal utility which it yields him; and, where the marginal utility
of money to a man is small, so also will be the real marginal utility
he derives in each direction of his expenditure. The extreme
inequality of the distribution of wealth gives immense importance to
this consideration. Its practical implications will be discussed in
Chapter V. Meanwhile, we may express the conclusions of the present
chapter by the statement that the price of a commodity tends to equal
its marginal utility, _as measured in terms of money_, i.e. relatively
to the marginal utility of money to its purchaser.

CHAPTER IV

COST AND THE MARGIN OF PRODUCTION

Sec.1. _An Illustration from Coal_. We have already had occasion to note
the symmetry which characterizes the relations of demand and supply to
price. This symmetry was apparent throughout the argument