CHAPTER XI

SECOND APPROXIMATION IN GEOMETRIC TERMS§1. Introduction

Graphic illustrations of the solutions of two economicproblems incident to the attainment of economic equilib-rium, assuming incomes fixed, have been given in Chap-ter X. One was an individual problem, the other a marketproblem. We found their solutions respectively to be:

(1) The income situation Q x which Individual 1 willreach from his original income position P 1 by borrowingor lending will be found where his borrower-lender motiveis balanced, i.e., where one of his Willingness lines is tan-gent to the Market line M; and

(2) The rate of interest, or divergency slope of theMarket line from 45° will be such that the center ofgravity of all Q’s, as above found, will coincide with thatof all the P's.

In this chapter the point P, which was assumed to bearbitrarily imposed upon the individual, is replaced by aseries of optional points among which he may choose. Ifthis group of points is shrunk into a single point, the an-alysis of this chapter becomes identical with that ofChapter X. In other words, Chapter X represents a spe-cial case, while this chapter represents the general prob-lem.

In Chart 35 are represented various possible pointssupposed to indicate the various income situations avail-

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