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

Structure type:: Chapter

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

Collection:: Economics Books

92 ECONOMIC ESSAYS IN HONOR OF JOHN BATES CLARK increase of P P; in return per unit. When the elasticity of X is less than unity of .50, then its unit rate of return tends to be somewhat above P; and that of Y will be somewhat below. X will still have gained but not as much as when its elasticity was 0 and that of Y was still 1.0. The computations which have been made by Mr. Wilcox indi- cate, moreover, that for the productivity surface assumed * X now has a slightly larger share of the joint product than before the increase in the effectiveness of industry took place. If we follow out other illustrations of varying elasticities it will be seen that X's gain at zero elasticity will be greater if Y has an elasticity of 2.0 than if it has 1.0, for Y in the former case will increase twice as rapidly as in the latter, and hence the original proportions between X and Y will be more disturbed and the marginal productivity of X still further enhanced. Similarly, although X will gain less when its elasticity is .5 rather than 0, while that of Y is 1.0, it will plainly gain more if Y’s elasticity is 4.0, than if it is 1.0. The conclusion then is clear, that when we are dealing with positive elasticities the factor with the least elastic supply gains most from an expansion in production, and that it gains the more, the more elastic is it rival factor. In the case of the par- ticular productivity surface noted above it seems also to be true that this holds for relative shares .of the total product as well as for payment per unit. The problems which arise out of negatively sloping supply curves are, however, still more fascinating. Thus, let us assume a situation where we have one positive and one negative supply curve, but where the elasticities themselves are equal as is repre- sented in Figure 11, where unit elasticity characterizes both X and Y. The relative supply of both X and Y in the original equilibrium is represented by A and the relative price paid to each by P. Then an increase in the effectiveness of industry would initially raise the return to each above P to, let us say, P,. But this, in the sequence now familiar, would cause the supply of X (since it is negatively elastic) to contract to B, while that of Y would increase by an equal amount. Since the supplies of the two factors would thus move in opposite directions, the KXitayYl-a L 7 = TE where Z is the total product.

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