industrial income going respectively to the land-owner, the
capitalist, and the laborers is determined by the interaction of the
forces of supply and demand, operating under conditions of free
competition. The entrepreneur's demand for land, labor, or capital
will depend upon whether or not he sees an opportunity, under a
particular set of circumstances, to add to his product by the
employment of each or all of these factors. Where the supply of
laborers is large, relatively to demand, the promised product of any
one laborer is likely to be relatively small, and in this case the
entrepreneur or employer will be unwilling or even unable to offer a
particular laborer high wages. Under these circumstances the
competition of the many laborers for the few jobs will accordingly
bring about lower wages. Where, on the other hand, the supply of
laborers is small, relatively to demand, the chances that a particular
laborer will be able to add to the product are relatively great, and
the competition of employers for laborers will result in higher wages.
The same reasoning is applicable to rent and interest. The automatic
operation of the law of supply and demand, functioning in a freely
competitive market, determines the shares which go to land, labor, and
capital. The share going to the individual entrepreneur is, as has
already been pointed out, a residual share, _i.e._ what is left over.


QUESTIONS ON THE TEXT

1. What is meant by the distribution of industrial income?

2. Why was this distribution of relatively small importance prior to
the Industrial Revolution?