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Similarly by starting with the numbers of merino and crossbred sheep which would yield the same quantity of mutton, we can calculate the marginal cost of wool; and again the tendency will be for this marginal cost to be equal to the price. The following arithmetical example may make it plainer: Suppose a merino sheep yields 9 units of mutton and 10 units of wool.
Five dogs accompanied the party, viz., Lion and Tiger, crossbred bull and mastiffs, experienced pig fighters, Sam as a reserve, and three mongrels as light skirmishers. The first animal met with was a huge old boar, the hero of a hundred fights, the great-grandfather of pigs. He stood at bay among the tussocks, the dogs barking furiously around him.
The development of the arts of refrigeration led in the eighties to an important change. It became possible to obtain relatively high prices for frozen mutton in overseas markets. There was, therefore, a marked tendency, especially in New Zealand, to substitute, for the merino, the crossbred sheep which yields a larger quantity of mutton and a smaller quantity of wool of poorer quality.
Then 10 merino sheep, yielding 90 units of mutton + 100 units of wool, cost £100; while 9 crossbred sheep, yielding 90 units of mutton + 72 units of wool, cost £90. Hence you could obtain an extra 28 units of wool for an extra cost of £10, by maintaining 10 merino sheep rather than 9 crossbred sheep. The marginal cost of wool is thus £ 10/28 per unit.
The problem is essentially the same as that of the substitution of the crossbred for the merino. We can take the various possible combinations of the factors of production, and contrast two cases in which different quantities of one factor are employed, together with equal quantities of the others.
They were faced with a dwindling supply and a soaring price of merino wool; and the adaptability with which they met the situation, and won prestige for the crossbred tops, and yarns and fabrics, to which they largely turned is a matter of just pride in the trade to-day.
Suppose a crossbred sheep yields 10 units of mutton and 8 units of wool. Suppose, further, that a merino sheep and a crossbred sheep each cost the same sum, say, for convenience, £10, to rear and maintain; and that there are no special costs assignable to the wool and the mutton respectively, as, of course, in fact there are.
I believe that the scheme would be of economic advantage, for the robe of the buffalo is of high market value, and the same is true of the robe of the crossbred animals. I call your especial attention to the desirability of giving to the members of the Life Saving Service pensions such as are given to firemen and policemen in all our great cities.
This extra cost we can regard as constituting the marginal cost of mutton. So long as this marginal cost falls short of the price of mutton, it will be profitable to extend further the substitution of crossbred for merino sheep. The process of substitution will in fact be continued until we reach the point at which the marginal cost is about equal to the price.
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.
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