The statement of the later economists that exchange value depends on, and is determined by, the ratio between subjective values in no way conflicts with the above statement that value is determined by the ratio between demand and supply, for the demand for a commodity is determined by its subjective value and by that alone, and must vary with it. Hence, as the quantity of anything increases and its subjective value lessens, the demand for it relative to the quantity of other articles also lessens, and its value falls, and _vice versa_. This close connection between value and the ratio between demand and supply--value rising as the ratio increases, and falling as it grows less--is true in all cases. No other factor can affect the value of any commodity except by altering the relation or ratio between these two. Cost of production is a more remote factor that enters into the determination of value in most but not in all cases, through its effect on supply. It is used, like the term _value_, in two senses, a subjective and an objective sense. In the former it means the pain of labour and waiting that must be undergone to produce the good that is being considered,--the negative pleasure given to get the positive pleasure to be derived from that good. In its objective sense--the sense in which it is generally used--cost of production means the goods that must otherwise be given for, bartered or set against those desired; in a simple case of direct production, it means the goods that might have been produced, in lieu of those that have been produced, with the same subjective cost; in more complex cases, it means the sum of the goods sacrificed, in the shape of raw materials, rent, wages, interest, etc., to get the one produced. When the value of a commodity falls to or below the cost of production, or even when it approaches it so closely as to reduce the margin between the two--the producer's profit--below that in other industries, then, men will cease to produce the one and turn their labour and capital to producing the others which offer greater profit, thus lowering the supply of the abandoned product and raising that of the more profitable, thereby affecting the value of both. The effect of this operation of the law of cost is to equalize profits and make the values of things conform to their cost or be proportional thereto. The law can only operate when men are free to turn their labour from one industry to another. Hence arises the important exception to the law, that the values of goods produced by a monopoly are not affected by their cost of production. Only under free competition does the law operate in full force. As monopoly becomes a factor cost ceases to be, and, when the monopoly is complete, cost has no weight whatever in the determination of value.