IN GEOMETRIC TERMS

The Investment Opportunity Principle B is repre-sented by the tangency of the Opportunity line with theMarket line, so that the marginal rate of return over costis equal to the rate of interest.

This last principle, combined with Impatience Prin-ciple B, means that each individual so adjusts his position(first along the Opportunity line to P and then alongthe Market line to Q) that the Market line PQ shall betangent to the first at P and to the second at Q. This Qwill be his income situation finally chosen. To clear themarket the Q’s must be so chosen that their center ofgravity coincides with that of the P’s.

§7. The Nature of the Opportunity Line Discussed

This chapter differs from Chapter X chiefly in theintroduction of the concept of investment opportunitywhich is depicted on the charts as the Opportunity line,or 0 line. Just what does this line represent in the realworld? Is there any distinction between investing in theopportunities offered by man’s environment and lendingat the market rate of interest? Is not lending, or buyinga bond, just as truly investing as digging an oil well,building a factory, or making shoes? Reserving the merelyverbal part of the answer, let us first go to the main ques-tion as to the possibility of definitely distinguishing thetwo lines.

Under the assumptions explained in Chapters V, VI,VII, and VIII, there is a clear distinction between an 0fine and an M line. The O line, unlike the Market lines,is not straight, is not common to all individuals, and is nota family of lines but a single line. It may be defined as thelimiting line of a group of points which represent all theoptional income situations available to an individual who

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