However, partly for the reasons already discussed, commodities do not sell at prices equal to the values. As described, if demand for A doubles, its price, measured in B, would double, despite no change in values. The consequence is that producers of B switch to production of A. So, over time, supply of A rises, and its price falls back towards its value, whilst the supply of B falls, and its price rises. But, in Capital III, Marx also explains that, with capitalist production, the capitalist is interested only in maximising their annual rate of profit, which is the basis of them being able to maximise their accumulation of capital.
Two capitals of equal size might produce different amounts of profit, because of their different composition. Because it is only labour that produces new value and surplus value, those capitals that employ proportionately more labour will produce more surplus value. For example,
I
c 800 + v 200 + s 200 = 1200, r` = 20%
II
c 200 + v 800 + s 800 = 1800, r` = 80%
So, both capitals are of 1000, but the second produces profit of 800, and a rate of profit of 80%, compared to profit of 200, and rate of profit of 20% in the former. The capitalists in the former would then move capital to the latter, and as supply in the former fell, so the price of its commodity would rise above its value. As capital moved into the latter, its supply would rise, and so its price would fall below its value. A stable situation arises only when prices in each sector are equal to 1500, at which point the amount of profit, in each is equal to 500, and the rate of profit is 50%.
As Marx describes, in Capital III, and Theories of Surplus Value, this is not the only factor, because the rate of turnover of capital has to also be taken into consideration, when calculating the annual rate of profit. In short, in spheres where the circulating capital turns over more quickly, the annual rate of profit will be higher, and rate of profit/profit margin lower, and vice versa.
But, again, values are not the same as exchange-values, or prices. Values are absolute, as measured by labour-time, whereas exchange-values are relative, as measured by the proportional relation between different values, i.e. the value of A relative to the value of B. The value of A may rise from 10 hours to 20 hours, for example, but if the value of B rises from 10 to 20 hours, there is no change in their exchange-value. Before and after, 1 unit of A exchanges for 1 unit of B.
Price is only a specific form of exchange value. It is the value of each commodity measured in terms of a quantity of one specific commodity – the money commodity – be it cattle, salt, copper, silver or gold. A quantity of this money commodity, say, a ¼ ounce of gold, becomes the standard of price, and is given a name, such as £1. over time, Marx explains, in A Contribution to The Critique of Political Economy, this name of the standard of prices remains the same, but the quantity of gold it actually represents is continually reduced. Consequently, because the name £1 remains constant, the prices of commodities, measured in those £'s, rise, even though the value of the commodities fall. This is the basis of inflation.
“Now, the same general laws that regulate the price of commodities in general of course also regulate wages, the price of labour.” (p 26)
That is wages, as the price of the commodity labour-power, are determined primarily by the cost of production of labour-power. Secondly, however, that price will vary according to the state of demand and supply for that commodity. When demand for labour-power is high, wages will rise, and vice versa. However, there is a difference between this commodity and all others, when it comes to capitalist production.
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