When we turn from expenses of production to the aggregate takings from the sale of the several quantities of supply, we shall find a similar irregularity of increase. Elasticity in demand, as tested by the stimulus given to consumption by a fall of price, differs not merely in different commodities, but at different points in a falling scale of prices. A number of equal decrements in price, according as they stimulate the satisfaction of weaker wants of earlier consumers, or strike into new classes of consumers, or supply new kinds of wants, will have widely different effects in increasing the aggregate takings.
We have then two widely fluctuating and highly irregular gradations of money terms, representing expenses of production and the aggregate price of the various quantities of supply, each determined by a wholly different class of considerations. But the interest of a Trust, as we see, lies in fixing supply at the highest net profits. Now the net profits of producing and selling any specified quantity of supply are ascertained by deducting the expenses of production from the aggregate takings. The relation between the growth of expenses of production and of aggregate takings will yield a different net amount of profit at each increment of supply. The diagram opposite will illustrate the nature of these relations.
AL is the line indicating at the several points, B, C, D, etc., proportional increments in supply. If the monopoly be a steel rail trust, B marks the millionth ton, C the two millionth ton of output, and so on. A'L' is a curve indicating, by its diminishing distance from AL, the diminishing expense of producing each unit of the increased output, so that the expense of producing the first ton, if only one is produced, is AA', that of the millionth ton, if one million are produced, BB', and so on. The expenses of producing one million tons will thus be represented by the figure ABB'A', those of two millions by the figure ACC'A'. Further, let the curve _al_ represent, by its diminishing distance from AL, the diminishing price at which the several additions to supply can be sold, so that the first ton sells at A_a_, the millionth at B_b_, and so on, the aggregate price of the first million tons being AB_ba_, that of the first two millions being AC_ca_.