ABSTRACT
It is true that an inelastic supply of an essential factor like skilled labour, entrepreneurship or capital would restrict the simultaneous expansion of a wide range of industries. But the magnitude of the constraint set by a fixed factor is a function of the degree of variability of the technical coefficients of production. In case of a fixed factor available in limited supply and fixed coefficients of production, expansion of one industry would draw away resources from another, involving a diminution of the latter’s output. With variable factor proportions, the increased use of the scarce factor by the expanding industry may be compensated in other sectors by the substitution by other factors so that expansion of output on many lines is possible subject to this limitation that substitution beyond a certain point may lead to a rise in costs.
