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 117 4. If the goods in which relatively much labor is contained have on the whole elasticities of demand different from those which characterize the commodities in which relatively little labor is embodied, the processes of distribution will be affected. Let us suppose that the demand for the goods in which much labor is mixed (A goods) is much less elastic than that for commodities (B goods) in which there is relatively little labor. Then if the net effectiveness of industry increases with the same number as before of labor units and capital units, the values of the B goods will fall relatively to the A goods. The marginal productivity of labor will therefore rise as will its reward. There will, of course, be a movement of labor from the B to the A industries which will reduce the gains somewhat, but they will nevertheless still be considerable. If the B industries were, how- ever, to be characterized by the more elastic demand, labor would not make such gains for the values of B in terms of A, would rise and with this the demand for and the marginal productivity of capital. Should a diminution in the effectiveness of industry occur, the prices of the B goods would rise much more rapidly than those of the A category and hence their relative values would increase. This would increase the demand for and the marginal productivity of capital above the point which it would in the absence of such differences in elasticity of demand, attain. The marginal productivity of labor would, on the other hand, be lowered. If the supply of labor should’ shift to the left, and if the elasticity of demand were greater for the A than for the B com- modities, then the curtailment in production which the reduction in the number of labor units would occasion, would cause the prices of the B goods to rise more rapidly than those of class A. There would consequently be a movement of labor out of A into B with an attendant probable reduction in the price of labor below what it would otherwise have been had the opposite con- dition obtained as to elasticities. 10. Some Next Steps in Research What is clearly needed is inductive research to determine (1) the actual elasticities of supply of the factors of production, (2) the changes in physical output effected by varying the quantities i ply

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