ELASTICITY OF SUPPLY AS A DETERMINANT OF DISTRIBUTION 87 
We may begin with a situation where the supplies of both 
factors are absolutely inelastic, as in Figure 6. The increase in 
output will of course cause the return to each to rise from 
P to P;, but this will not 
lead to any change in 
supply, since the same 
amount will be offered 
whatever may chance to 
be the price. There will, 
therefore, not be any re- 
adjustment in marginal 
productivities and the sit- 
uation will remain as it 
was immediately after the 
increase in output took 
place and the return to 
each factor increased by 
PP,. 
Let us assume for a 
second illustration that both Taussig and Kleene are correct and 
that the supply curves of both factors are infinitely elastic as is 
represented in Figure 7. 
Then an increase in total 
output and in return to 
both factors X and Y 
would cause a great ex- 
pansion of each along its 
respective supply curve. 
It might seem as though 
there would be an un- 
limited expansion of the 
quantities of X and Y 
since their respective 
rates of remuneration 
would be higher than the 
amounts P; and P at 
which almost infinite 
amounts of the factors would be produced and offered. But in 
real life there would be obstacles which would prevent this from 
happening. In the first place, the third factor, land, would not, 
= 
Fic. 6 
P2| 
Fig. 7