The Supply of Factors to a Particular Industry
Industry
Most factors have many uses. A given piece of land can be used to grow
any one of several crops, or it can be subdivided for a housing
development. A computer engineer living in the Ottawa Valley can work
for one of many firms, for the government, or for Carleton University. A
lathe can be used to make many different products, and it may require no
adaptation when it is turned for one use or another.
For any factor of production, a change in the factor price offered by one
industry may cause that factor to relocate as it pursues a higher payment.
The extent to which a factor’s supply adjusts in response to price changes
is its elasticity of supply.
By offering a higher factor price, one industry can attract a factor away from another industry,
even though the economy’s total supply of that factor may be fixed. Thus, a factor’s elasticity
of supply to a particular industry is larger than its elasticity of supply to the entire economy.When we consider the supply of a factor for a particular use, the most
important concept is factor mobility. A factor that shifts easily between
uses in response to small changes in incentives is said to be mobile. Its
supply to any one use will be elastic because a small increase in the price
offered will attract many units of the factor from other uses. A factor that
does not shift easily from one use to another, even in response to large