THE UNDERLYING PRINCIPLES 351 
t the same time with the international disturbances, it happens 
hat a change takes place in the effectiveness of labor in produc- 
ng a given article, there will be a change in the price of that 
rticle. If, say, the same labor produces twice as much of 
oolen cloth, woolen cloth will be one-half the price it was before. 
he general index number of prices will show a fall in prices; 
ut the money income of the woolen producers would be the same 
disregarding transitional effects) and the total money income of 
he population would be the same. Other prices would not be 
Itered. 
may digress for a moment to point out an analogy between 
he case just considered — increase in the effectiveness of American 
abor in producing some particular article — and the more general 
ase considered in earlier chapters, that of an increase in the 
ritish demand for American goods.! Suppose such an increase 
n demand, bearing in mind what it is the American exporters 
eally do: that it is they who really supply to the American 
ublic the British goods which are received in exchange for the 
xports. The consequence of an increase of the British demand 
s that more British goods are got in exchange for each unit of 
merican exports; hence the greater is the contribution which 
he American exporters make to the national dividend of goods 
nd services. These particular products of American labor — 
o we may describe the things imported from Great Britain — fall 
n price. But nothing else is affected. The general level of domes- 
ic prices remains the same, and each several domestic price remains 
he same.? Similarly in Great Britain. The goods which come 
in from America are the product of the British labor which is 
given to the goods exported fo Americans. That British labor 
1 See Ch. 4, p. 30. 
? It need hardly be remarked that temporary effects on other prices are possible. 
Only if the elasticity of demand for woolen cloth were exactly unity would there be 
complete absence of effect on other articles. If the elasticity of demand were more 
or less than unity, there would be some transfer of purchasing power from woolens 
or towards woolens (as the case might be) and therefore an influence for the time 
being on the prices of woolen goods, a corresponding shift of labor and capital, a 
readjustment in the output of the woolens and of the other goods, and finally the 
state of prices indicated in the text. These possibilities may be neglected in the 
present inquirv.