Economic essays

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Monograph

Identifikator:: 1753623200

URN:: urn:nbn:de:zbw-retromon-136107

Document type:: Monograph

Title:: Economic essays

Place of publication:: New York

Publisher:: Macmillan

Year of publication:: 1927

Scope:: viii, 368 S.; Ill., graph. Darst.

Digitisation:: 2021

Collection:: Economics Books

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Document type:: Monograph

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Title:: Elasticity of supply as a determinant of distribution / Paul H. Douglas

Collection:: Economics Books

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

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