If we take the problem of joint products, the conception of cost of production fails us still more conspicuously. For what is the cost of producing wool, or the cost of producing mutton? We can speak of the cost of rearing sheep: but it is hardly possible to allot this cost, except quite arbitrarily, between the two products. How, then, can we explain the separate prices of these things by reference to cost alone? Instances of joint production are becoming so common in the modern world, or at least, with the growing attention to the utilization of by-products, are assuming so much more heightened a significance, that an explanation of price, which does not apply to them, is a very feeble one indeed. §2. _The Law of Diminishing Utility_. Let us turn back, then, to the factor of utility, and see if we cannot put on a more satisfactory basis the relation between utility and price. The clue to the puzzle is to be found in a brief reflection on the implications of the second general law propounded in Chapter II. A rise in price, it was there stated, will sooner or later diminish the demand. This was asserted as a matter of fact, observed from and confirmed by experience. But what does it signify? To what causes is this familiar fact to be attributed? The first stage of the answer is very ample. The many individuals, whose purchases make up the demand for the commodity, will buy smaller quantities now that the price is higher. Possibly some of them may cease to buy it altogether; but as a rule it would be reasonable to suppose that most people continue to buy a certain amount though a smaller amount than hitherto. Let us turn our attention, then, to the individual purchaser, and ask ourselves why he (or let us say she) acts in the manner indicated. The obvious answer is that the more she already has of anything, the less urgently does she require a little more of it. If she buys 6 pounds of sugar every week when the price is 7 cents a pound, but only 5 pounds when the price is 8 cents, she shows by her action that she does not consider that the additional utility she will derive from buying 6 pounds a week rather then 5 pounds is worth as much as 8 cents. But she shows at the same time that she thinks it worth 7 cents. For, when the price is 7 cents, no one compels her to buy that sixth pound. She could stop, if she chose, at five; and it may serve to make the point quite plain if we suppose her actually to hesitate before she buys the sixth. She has hitherto, let us say, been buying 5 pounds a week at 8 cents. To-day she enters the shop and finds the price is down to 7 cents. She asks for her customary 5 pounds; then she pauses, and a minute later turns her order into six. What are the alternatives which she has been weighing one against the other in that momentary pause? Not the utility of the whole 6 pounds of sugar against the total price of 42 cents. For she has already ordered the first 5 pounds; and the