important feature of demand without turning to see whether it has a counterpart on the supply side, though indeed we may not always find one.  In the last chapter we examined the relation between utility and price, and found that the true relation was between the price and what we termed the marginal utility.  Corresponding to utility on the demand side is cost of production on the supply side.  The question should thus at once suggest itself—­“Can we speak appropriately of the marginal cost of production, and will this serve to make clear the relation between cost and price?” To answer these questions, let us take one of the instances in which we found that price could not be explained satisfactorily by the bare phrase “cost of production.”

An important feature of the coal industry, which recent events have brought into sharp prominence, is the great diversity of conditions between different coalfields and different collieries.  We speak of rich seams and poor seams, of fertile and unfertile mines, and we are aware that the costs of raising coal to the surface differ very widely in accordance with these diverse natural conditions.  Nor must we confine our attention to the cost price at the pit-head.  If we wish to speak of cost of production as a factor determining price, we must use the term in a broad sense to include the transport and other charges necessary to bring the coal to market.

In this respect also one coalfield differs greatly from another.  Some are well situated close to a large market, or within easy reach of the seaboard; others must incur very heavy transport charges to bring their coal to any considerable centre of consumption.  These varying conditions lead, as we well know, to great variations in the financial prosperity of different colliery concerns.  In Great Britain, under the abnormal conditions which prevailed during the war, and subsequently, these variations were so huge as to constitute a most formidable embarrassment and to contribute, more perhaps than any other single factor, to the unrest and instability by which the industry has been afflicted.  But they are always with us, if usually upon a more modest scale.

What, then, is the normal relation between price and cost in the case of coal?  Should we direct our attention to the average costs over the whole industry, or the costs incurred by the richer and better situated mines, or, lastly, that of the poorer and worse situated?  Now, as things are, it is clear enough that no concern will continue indefinitely producing at a loss.  It may do so for a time, rather than close down altogether, hoping to recoup itself later when the market has taken a more favorable turn.  But, in the long run, taking good years with bad, it must expect to obtain receipts sufficient not only to cover its necessary expenditure, but to provide also a reasonable profit on the capital employed.  Of course, once the capital has been sunk and embodied in plant and buildings,