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 105 of each factors, that of X rising above P but appreciably below Pi, while that of Y will fall below P but will still be appreciably above Pp. The ultimate points of equilibrium may then be designated as P3 and Py, and at these prices A E fewer units of X and A D fewer units of Y will be forthcoming. Had the elasticity of Y been 2.0 instead of 1.0, then the ulti- mate unit gain secured by X would have been still less; for as the marginal productivity of Y fell because of the fact that less X was mixed with it, the supply of Y would contract twice as rapidly as before and hence the forces working for the reéstab- lishment of the equilibrium would be strengthened. But while the unit returns to X and Y would ultimately approach nearer to P, than P3 or Py they would not quite reach it. X would therefore retain some gain and Y would suffer some loss. The conclusion is, therefore, that (1) the more inelastic a factor becomes the more it will gain from an increase in bar- gaining power, while (2)—and this is less appreciated—the more inelastic is the supply of the rival factor, the better it is for the factor whose bargaining power has improved. The units of a factor which remain will desire, therefore, that their numbers should not expand under prosperity nor that those of its rival should de- crease under adversity. Still more interesting results of the same gen- eral character are secured when we deal with one or more negative supply curves. Let us suppose (Figure 20) that X has originally a positive elas- ticity of 1.0 and Y an equal negative elasticity. We shall designate the supply offered of each by A and the unit price paid as P (AS). Let us now decrease the elasticity of X to 1.9. This will cause only B units of X to be offered for P, and in consequence its marginal productivity would rise and that of Y would fall. This increase in return would cause the quantity 83 A Fic. 20

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