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National Wealth
The natural price is the price of a good or service in a perfectly free market, or the minimum price for which it is worth supplying the good or service. It is equal to the producer’s costs—rent, wages, and fixed and circulating capital—plus the ordinary rate of profit (since it would not be worth supplying the good or service for any lower rate). Market prices naturally gravitate toward natural prices, and the opposite of the natural price is the monopoly price.
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Natural Price Term Timeline in The Wealth of Nations
The timeline below shows where the term Natural Price appears in The Wealth of Nations. The colored dots and icons indicate which themes are associated with that appearance.
Book 1, Chapter 7
...wealth, amount of fertile land, degree of economic specialization, and rate of growth. A commodity’s natural price is the cost of rent and labor to produce it, plus the average rate of...
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...demand, suppliers will become willing to sell their commodities at a loss—for less than the natural price . These effects are particularly strong with perishable or essential commodities, like food. When supply...
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...market, until it falls to the level of the effectual demand and returns to its natural price . Conversely, if effectual demand exceeds supply, the commodity will sell at a premium, so...
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Even though market prices naturally gravitate towards natural prices , sometimes they can stay far above natural prices, for a variety of reasons. Some...
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In contrast, market prices don’t usually stay below natural prices for a long time. When a commodity’s market price dips below its natural price, sellers...
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Ultimately, the natural price is made up of wages, profit, and rent, which all vary depending on a society’s...
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Book 1, Chapter 11
...fall. The Spanish king repeatedly reduced the silver tax, and by 1636, silver approached its natural price . If the taxes went lower, or some of the mines were abandoned, the price...
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