1. Prices, I have said, are made to rise, according as demand is _high_, not according as it is _great_. Now, in the objection, it is said, that, in proportion as the demand is _great_, a less proportion of the equivalent must go to every parcel of the merchandize; which I apprehend to be false: and this shews the necessity of making a distinction between the _high_ and the _great_ demand, which things are different in trade, and communicate quite different ideas. 2. In all trade there is an exchange, and in all exchange, we have said, there is a reciprocal demand implied: it must therefore be exactly inquired into, on which hand the competition between the demanders is found; that is to say, on which hand it is _strongest_; according to the distinction in the second chapter. If the inhabitants of the country be in competition for the manufactures, goods will rise in their price most undoubtedly, let the quantity of the produce they have to offer be large or small; but so soon as these prices rise above the faculties, or desire of buying, in certain individuals, their demand will stop, and their equivalent will be prevented from coming into commerce. This will disappoint the traders; and therefore, as their gains are supposed to be great, either a competition will take place among themselves, who shall carry off the quantity remaining, supposing them to have separate interests; or, if they are united, they may, from a view of expediency, voluntarily sink their price, in order to bring it within the compass of the faculties, or intention, to buy in those who are still possessed of a portion of what they want. It is from the effects of competition among sellers that I apprehend prices are brought down, not from any imaginary proportion of quantity to quantity in the market. But of this more afterwards, in its proper place. So soon as the price of manufactures is brought as low as possible, in the new nation; if the surplus of their commodities does not suffice to purchase a quantity of manufactures proportioned to their wants, this people must begin to labour: for labour is the necessary consequence of want, real or imaginary; and by labour it will be supplied. When this comes to be the case, we immediately find two trading nations in place of one; the balance of which trade will always be in favour of the most industrious and frugal; as shall be fully explained in another place. Let me now direct my inquiry more particularly towards the consequences of this new revolution produced by commerce, relative to the not-trading nation, in order to shew the effect of a passive foreign trade. I shall spare no pains in illustrating, upon every occasion, as I go along, the fundamental principles of commerce, demand, and competition, even perhaps at the expence of appearing tiresome to some of my readers. ------------------------------------------------------------------------