THE THEORY OF INTEREST

Under our assumption of a perfect market, all theMarket lines P-yM 1} P 2 M 2 , P&M S , etc., are parallel toeach other, their common divergence from a 100 per centslope representing the one universal market rate of in-terest, here supposed to be 10 per cent. 4 Since the Marketlines are thus parallel, they are really impersonal or in-dependent of particular individuals, and we may conse-quently picture the whole map (Chart 30), as coveredwith straight and parallel Market lines, like the con-ventional picture of a rainstorm, each line being slightlysteeper than 45°, and its divergence therefrom indicatinga rate of interest.

§7. Many Families of Willingness Lines

The Willingness lines, on the other hand, are personal,or individual. The particular slope in each case is, ofcourse, dependent on the particular income position P x .A given Individual 1 is concerned with only one Willing-ness line at a time, out of his whole “family” of lines—the one line which passes through his actual incomeposition at P t . By comparing his Willingness line at thatparticular point with the Market line, we have a graphicpicture of the motives which decide whether he will bor-row or lend.

There always exists for him, potentially, other Willing-ness lines, passing not through his actual income positionPi, but through any other income position at which hecould be imagined to be. These curves represent the vari-ous rates at which Individual 1 would be willing to bor-row or lend if his income position were varied. Thus

* So large a rate as 10 per cent is used in the charts because a linewith a divergence from the 100 per cent slope of less than 10 per centcannot be clearly seen.-

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