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

ELASTICITY OF SUPPLY AS A DETERMINANT OF DISTRIBUTION 103 of X to Y will now be B to A, and in consequence the mar- ginal productivity of X will rise to, let us say, P; and that of Y will fall to P,. But this will create no further change in the quantities of either, so that as long as these quantities are unchanged, X can continue to enjoy the greater return which will come from its higher marginal productivity. Except for the limitations in the productivity curve there is no limit to the increased per unit gains which a factor can enjoy if by limiting its supply it can increase its bargaining power. Where both factors have therefore absolutely inelastic supplies, the argu- ments of the so-called bargain theorists, that the result will depend on the relative bargaining strength of the two factors, is approximately true if we take as our test of bargaining power, the relative changes in position and slope of the supply curves. But this interpretation of bargaining power is one that has been little un- derstood by the bargain theorists themselves. The ultimate unit return of X may therefore be repre- sented by P; instead of by P as was originally the case, while the ulti- mate return to Y may be shown as P, instead of P as at first. Let us assume, however, another case in which X is completely inelastic and Y has unit positive elasticity. (Figure 18.) Then if we indi- cate an increase in the effectiveness of X's bargaining power by shifting it to the left to B and designating its supply curve by BS., we have the ratio of the quantity of X to Y as one of B to A instead of A to A as before. The unit return to X will in consequence rise to let us say P, and that to Y will fall to P, in consequence of the forces which have been so often mentioned in this essay. But while the increase in pay- ment to X will not lead to any increase in its supply, the dimin- ished return to Y will cause the supply of this factor to diminish Fig. 18

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