ELASTICITY OF SUPPLY AS A DETERMINANT OF DISTRIBUTION 91 
tions which we have made, the total share of X would gain 
relatively to that of Y. Other assumptions led to fixed relative 
shares. 
We may now proceed to a slightly more complicated case, 
namely, that where both factors have positive but differing elas- 
ticities, which we may represent in Figure 10 as X with .5 and Y 
with 1.0. We have represented them in the original state of 
equilibrium as having the 
supply A and the price P. 
The increase in the total 
effectiveness of industry 
which raises the initial 
payment to each to Pi, 
calls forth an increase in 
the supply of both, but Y 
will expand at twice the 
rate of X and in conse- 
quence the marginal prod- 
uctivity of X will rise 
above and that of Y will 
fall below Pj, but not by as 
much as when the elas- 
ticity of X was 0. But this 
further rise in the return to X will cause its supply to expand 
beyond B and the fall in the return to Y will cause its supply 
to contract from C. There will thus be a double force operat- 
ing to lower the marginal productivity of X down towards 
P; and to raise that of Y up again towards P;. It will be 
stronger than in the case previously chosen, since the quantity 
of X will now be expanding as well as that of Y shrinking. 
The final equilibrium will, therefore, be nearer P;. For it 
should be remembered that both would certainly receive more 
than P and that every percent increase in price above this 
point will cause the supply of Y to expand twice as rapidly as 
that of X, and hence will increase the marginal productivity of X 
above the point which it would otherwise have reached, and will 
cause a diminution in the marginal productivity of Y. Since the 
total expansion of the productive powers of industry are such 
as could cause an increase in output to F,, were both elas- 
ticities equal to unity, and yet would permit both to enjoy the 
Fig. 10