§6. The Whole Family of Market Lines

But before we make use of the contrast between the M and W lines to follow the individual as he moves his income position from P1 either northwest as a lender or southeast as a borrower, we must first complete our pictures of the two kinds of lines. Thus far only one line of each of the two kinds has been drawn. These are the only lines applicable to the given income position P1. But for every other income position in which we may place Individual 1, the Market line would encounter a different Willingness line.

Edition: current; Page: [243]

In the same way, we could picture a series of pairs of Market and Willingness lines for any other individual, such an Individual 2, depicted in Chart 29. In this case, Individual 2 is represented at one position to be willing to lend at 2 per cent but to be able to do so at 10 per cent, the market rate; we have then the Market line P2M2 and the Willingness line P2W2. In the same way, we could draw P3M3 and P3M3, for a third individual and so on.

Edition: current; Page: [244]

Under our assumption of a perfect market, all the Market lines P1M1, P2M2, P3M3, etc., are parallel to each other, their common divergence from a 100 per cent slope representing the one universal market rate of interest, here supposed to be 10 per cent.4 Since the Market lines are thus parallel, they are really impersonal or independent of particular individuals, and we may consequently picture the whole map (Chart 30), as covered with straight and parallel Market lines, like the conventional picture of a rainstorm, each line being slightly steeper than 45°, and its divergence therefrom indicating a rate of interest.