Then n of cloth will always exchange for exactly 2m of linen.
Consequently if n - m, the whole advantage will be on the side of England.
If n = 2m, the whole advantage will be on the side of Germany.
If n be greater than m, but less than 2m, the two countries will share the advantage; England getting 2m of linen where she before got only n; Germany getting n of cloth where she before got only m.
It is almost superfluous to observe that the figure 2 stands where it does, only because it is the figure which expresses the advantage of Germany over England in linen as estimated in cloth, and (what is the same thing) of England over Germany in cloth as estimated in linen. If we had supposed that in Germany, before the trade, 100 of cloth exchanged for 1000 instead of 200 of linen, then n (after the trade commenced) would have exchanged for 10m instead of 2m. If instead of 1000 or 200 we had supposed only 150, n would have exchanged for only 3⁄2m. If (in fine) the cost value of cloth (as estimated in linen) in Germany, exceeds the cost value similarly estimated in England, in the ratio of p to q, then will n, after the opening of the trade, exchange for p⁄qm.[1]
- ↑ It may be asked, why we have supposed the number n to have as its extreme limits, m and 2m (or p⁄qm)? why may not n be less than m, or greater than 2m; and if so, what will be the result?
This we shall now examine, and when we do so it will appear that n is always, practically speaking, confined within these limits.
Suppose, for example, that n is less than m; or, reverting to our former figures, that the million yards of cloth, which England can make, will not satisfy the whole of Germany's pre-existing demand; that demand being (let us suppose) for 1,200,000 yards. It would then, at first sight, appear that England would supply Germany with cloth up to the extent of a million; that Germany would continue to supply herself with the remaining 200,000 by home production: that this portion of the supply would regulate the price of the whole; that England therefore would be able permanently to sell her million of cloth at
