Prosperity and Depression.pdf

160 Analysis of TINo";'sThe more contentious questions arise when weE. Effec/s on come to deal with the effects of crop fluctuationsnon-agrimJ/tI- on industries not utilising agricultural raw materials.raj consllmers' These may be divided for convenience into congoodssumers' goods industries and producers' goodsindmlries. industries, or again into industries serving theagricultural population and industries serving thenonagricultural population. It may fairly be assumed that, exceptin advanced phases of expansion, the elasticity of supply ofgoodsin face of an increase in the money demand is considerable.The effect ofa big harvest on non-agricultural consumers' goodsindustries will depend on whether the money demand for consumers'goods of agricultural origin is elastic or not. The lesselastic it is the more probable it is that the big harvest and theconsequent fall in the price of food will result in a diversion ofdemand from food to non-agricultural goods, inducing a rise inthe supply of the latter, the extent of which depends on supplyconditions. The same is true, ifill/a/is mlltandis, of poor harvests.While there may be a general tendency for cropF. Farmers' chang~s to affect non-agricultural consumers' goodsptlreha.ring industries as a whole in a given direction, a distinc·power. tion must be made between those which supply the .agricultural population and those which supply thenon-agricultural population. It is often asserted that changes inagricultural output affect general business by changing the pur·chasing power ofthe agriculturist. Good harvests either increaseor diminish the farmer's income, according as .the elasticity ofdemand is greater or less than unity, and so affect the prosperityof the branches of indus4Y which serve his· needs. It is clear,however, that this.argument in itself proves nothing. For whatthe farmer loses in purchasing power other people are bound togain, and "ice tler.ra. Business Bags in the case of the industriessupplying the farmer, b~t is brisk in the case of the industriessupplying other people. ,"The net result of this redistribution ofpurchasing power will depend on the concrete situation,the phase of the trade cycle, the credit situation· in thevarious countries and lo~ities affected by the redistribution, andso on.