£10, by maintaining 10 merino sheep rather than 9 crossbred sheep. The
marginal cost of wool is thus £ 10/28 per unit.

Similarly 8 merino sheep, yielding 72 units of mutton + 80 units of
wool, cost £80; while 10 crossbred sheep, yielding 100 units of mutton
+ 80 units of wool, cost £100.

Hence you could obtain an extra 28 units of mutton for an extra cost
of £20, by maintaining 10 crossbred sheep in place of 8 merinos. The
marginal cost of mutton is thus £ 20/28 per unit.

So long as the price obtainable for wool exceeds £ 10/28, and that
obtainable for mutton does not exceed £ 20/28 per unit, it will pay to
substitute merino for crossbred; and conversely. If the price of wool
exceeds £ 10/28 and the price of mutton also exceeds £ 20/28, it will
be profitable to expand the supply of both breeds, until as the result
of the increased supply, one of the above conditions ceases to
obtain. Conversely, if the prices of both products are less than the
figures indicated, sheep farming of both kinds will be restricted.
The resultant of the processes of expansion or restriction, and
substitution, will be that, unless one of the breeds is eliminated,
the prices of mutton and wool will equal their respective marginal
costs. These marginal costs may, of course, alter as the process of
substitution extends. For the relative cost of maintaining merinos and
crossbreds will not be the same for every farmer. Here again it is the
costs at the "margin of substitution" that matter.]


§2. _Marginal Utility under Joint Demand_. On the side of demand there
exist as a rule similar possibilities of variation. _Some_ machinery,