Cost of Production Determines Minimum Price
The price of goods must at a minimum cover the costs of their production for production itself to be sustainable. More specifically, the selling price of an item must return the cost of the materials and provide sustenance for the craftsman and his family. Were it not so, the craftsman could not sustain his craft and must seek another form of employment.
There is some consideration of the proportion of the cost of production based on the nature of the good: how much of the cost is in labor and how much is in materials varies by the kind of good. There is also the matter of distribution - the people of Paris pay a sol for a pitcher of Seine water, which they could obtain without cost themselves, but compensate a water-carrier for the effort of bringing it to them.
Neither man nor land is uniform in production: fertile land produces more crops and supports more livestock, and a skilled worker produces more and better product than an unskilled one. In commercial terms, the value of a thing is determined by its productivity: the more it yields, the greater reward it demands, and this is rightly so.
But Cantillon readily admits that the costs of production are according to the land and labor necessary for its production. These costs are of great concern to the producer, but of no concern whatsoever to the consumer.
As consumers, men are governed by their "humors and fancies" that are indifferent to the costs of the producer.
The primary concern of the consumer is in the aggregate of all goods he may purchase given his income: the necessities of life to a household and beyond that to tend to their desire for conveniences and luxuries. He chooses, first and foremost, that which he can best afford.
A secondary concern of the customer is the availability of options: in considering clothing, if cotton is too expensive he will purchase garments of another fabric. Or in a competitive market, he will not pay a higher price to one merchant when goods of the same quality are available for less from another, regardless of the cost of their production.
There is also the question of quality: a suit of fine cloth may command ten times the price of a suit of coarse cloth, though both contain the same quantity of wool.
The negotiation between buyer and seller is an effect of their mutual desire for the items in exchange - the buyer for a good and the seller for money. The more desperate one is for the other's possessions, the more of his own he must give in exchange.
Thus, if farmers in a state sow more wheat than usual, much more than is needed for the year's consumption, they will not command an equal unit price for their excess, but instead must lower their price for their entire stock - wheat being readily available from many farms, the customer will choose the lowest price, and farmers who keep their price too high will find themselves unable to sell their crops. This has nothing to do with the intrinsic value of the good or the cost of production.
As a result, farmers will in the next season produce less wheat, recognizing the abundance of the crop decreases its value: some will sow less wheat, others may sow other crops, decreasing the aggregate supply. It may so happen that the aggregate is decreased too much, that what becomes scarce and the price becomes high, providing a bounty of profits that encourage the cultivation of more wheat in the following season.
As such there is a perpetual ebb and flow in the market prices of goods as suppliers attempt to bring just enough, but not to much, of a given good to market, guessing at what other suppliers may provide, and always being to some degree wrong.
There is brief mention of city magistrates who attempt to fix the market price of many things in order to encourage or discourage production. The folly of such men, assuming they can calculate the degree to which a good may be in demand, is no better and often quite worse than the natural fluctuations of a market.