The determinants of changing prices

The growth of population in the sixteenth and the early part of the seventeenth centuries had extensive consequences, both direct and indirect, for society and the economy. Many of these were expressed through changes in the level of prices. Every decade a larger number of people than before required food, fuel, clothing and housing, and since such continuing increases in demand could not be fully matched by equivalent increases in supply, after a long period of comparative stability in the fifteenth century, prices necessarily rose. The extent to which they did so depended very largely on relative elasticities of demand and supply, but in part also upon changes in relative costs of production.

The demand for the most basic necessities, especially cereal foodstuffs of which the diet of the masses largely consisted, was highly inelastic and increased pari passu with the growth of population. Market demand for cereals, however, grew much more rapidly than the population because the growth of the latter was accompanied by a continuous increase in the proportion of those who were unable to produce their own food, either because they lived in towns or because, whilst remaining in the countryside, they had little or no land of their own and relied on wages earned in agriculture or rural industry. (See below Ch. 3 secs, vii and viii; and Ch. 6 sec. i.)