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

104 ECONOMIC ESSAYS IN HONOR OF JOHN BATES CLARK from A towards B. But the supply will not fall to B because as it moves towards this point, marginal productivity will rise and this will break the force of the fall. It cannot return to A however, because of the initial change in quantities which the moving of the supply curve of X to the left effected. The point of new equilibrium will therefore be when B quantities of X and approximately C quantities of Y will be supplied, and with a unit return to Y of Ps; and to X of Ps. The factor X would therefore have enhanced its former return per unit while Y would lose, but the losses and the gains would not be as great as when Y as well as X was completely inelastic. Let us now assume (Figure 19) that the initial elasticities of the supply curves of both X and Y are 1.0 and that they are both represented by the curve 8, and that the supply of the two factors originally offered was that represented by A with the rate of payment P or AS. X now secures added bargaining strength and its elasticity decreases from 1.0 to .9, and the new supply curve being represented by X; so that at the price P, only B in- stead of A units as before are offered. This sets into motion the familiar train of consequences. But as a result of the marginal productivity of X rising to P; the supply of X will expand while that of Y will contract. There will thus be a double force at work to restore the original equilibrium. The combined movement will restore the ultimate marginal productivities of each factor nearer the original equi- librium than was the case when we were dealing with 1.0 and sero elasticities. But it will not completely restore it since the fact that the elasticity of X was .9 will mean that the supply of this factor will not increase as rapidly as a result of its increase in remuneration as that of Y will decrease. The effect of the initial change in elasticities will therefore not be completely removed. There will be some change in the ultimate amounts paid for units R

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