[Illustration: _Units of Goods_] [Sidenote: Market values built on individual estimates] 4. _Market values are built up on subjective valuations._ The idea of market values, therefore, is that of the want-gratifying power of goods as expressed in terms of other goods, where there are various buyers and sellers. They are not an average of the subjective valuations, nor are they made up of the extremes. They correspond closely with the subjective estimates of two of the exchangers. The other parties to the exchange are willing to accept the market ratio, for it offers them more inducements than it does to either one of the marginal pair. § III. PRICE IN A MARKET [Sidenote: One price in a market] 1. _A market is a body of buyers and sellers in such close business relations that the actual price conforms closely to the valuation of the marginal pair._ The word "price" which we have used, may be defined as value expressed in terms of some commonly exchanged commodity. The term is used more broadly of anything given in exchange. The very terms of this definition imply that there can be but one price in a market. This is a somewhat abstract but a useful economic proposition. Very often within sound of each other's voices traders are paying different prices for a good. On the occasion of a break in the stock-market, excited traders within ten feet of each other make bids that differ by thousands of dollars. Retail and wholesale merchants may be purchasing goods in the same room at the same time at very different prices. But within a group of buyers and sellers where competition is approximately complete, price is fixed with some degree of exactness. The more nearly the actual conditions approach to the ideal of a market, the less are prices fixed by higgling, and the more impersonal they become, the buyers and sellers being compelled to adjust their bids to the needs of the market, and not being able to vary them greatly one way or the other. [Sidenote: The earlier markets] 2. _Markets are steadily widening through the improvement of means of communication and transportation._ The earliest markets were established on the borders between tribes, villages or nations as a common ground where strangers met to trade. At such markets were brought together from sparsely settled districts a comparatively large number of merchants and customers. Buyers had the opportunity of wide selection both in kind and quality, and the sellers found a large body of customers gathered at one point. Throughout the Middle Ages purchases were made by the more prosperous husbandmen in great quantities once a year at the fairs or markets. As both the buyers and sellers came from widely separated places, there was, in most respects, no combination, and the conditions of a competitive market were present. [Sidenote: The growth of markets]