ELASTICITY OF SUPPLY AS A DETERMINANT OF DISTRIBUTION 117 
4. If the goods in which relatively much labor is contained 
have on the whole elasticities of demand different from those 
which characterize the commodities in which relatively little 
labor is embodied, the processes of distribution will be affected. 
Let us suppose that the demand for the goods in which much 
labor is mixed (A goods) is much less elastic than that for 
commodities (B goods) in which there is relatively little labor. 
Then if the net effectiveness of industry increases with the same 
number as before of labor units and capital units, the values of 
the B goods will fall relatively to the A goods. The marginal 
productivity of labor will therefore rise as will its reward. There 
will, of course, be a movement of labor from the B to the A 
industries which will reduce the gains somewhat, but they will 
nevertheless still be considerable. If the B industries were, how- 
ever, to be characterized by the more elastic demand, labor would 
not make such gains for the values of B in terms of A, would rise 
and with this the demand for and the marginal productivity of 
capital. 
Should a diminution in the effectiveness of industry occur, 
the prices of the B goods would rise much more rapidly than 
those of the A category and hence their relative values would 
increase. This would increase the demand for and the marginal 
productivity of capital above the point which it would in the 
absence of such differences in elasticity of demand, attain. The 
marginal productivity of labor would, on the other hand, be 
lowered. 
If the supply of labor should’ shift to the left, and if the 
elasticity of demand were greater for the A than for the B com- 
modities, then the curtailment in production which the reduction 
in the number of labor units would occasion, would cause the 
prices of the B goods to rise more rapidly than those of class A. 
There would consequently be a movement of labor out of A into 
B with an attendant probable reduction in the price of labor 
below what it would otherwise have been had the opposite con- 
dition obtained as to elasticities. 
10. Some Next Steps in Research 
What is clearly needed is inductive research to determine (1) 
the actual elasticities of supply of the factors of production, (2) 
the changes in physical output effected by varying the quantities 
i 
ply