Value & Capital, CHAPTER VIII, Section 6

This section examines the effects of an increase in the supply of some factor of production A. When the supply increases, without an increase in demand, the price must fall.  The techniques covered in previous sections can allow the effects on other prices to be worked out as well.

The text calls attention to one type of price effect it calls "particularly interesting."  This is the case of the effect on the price of some other factor of production that is used in the same industry or industries as factor A.  One possibility is that this factor, call it B, is complementary to factor A, and indeed, it has been pointed out previously that complementarity is the most likely relation among factors employed together in production.  The text notes that the direct effect in this case is to raise the price for B;  this makes intuitive sense, as the increased supply of A will lead to an increased quantity being used in production, which increases the demand for B.  But the text also notes that an important indirect effect will work in the opposite direction;  namely, the product produced from A and B is in a sense a substitute for them.  Hence B is a substitute for a substitute of A, which will tend to make its price fall.  Therefore

The net effect on the price of B is thus compounded out of two contrary tendencies, a direct effect tending to raise it, an indirect effect tending to reduce it;  either may be dominant.

If A and B are substitutes, then the combined effects will tend to reduce the price of B.

The section closes by noting that complementary factors are the commodities most likely to increase in price when the supply of a factor increases.  Even here, however, such a price

will only actually rise if the prices of their common products are little affected, that is to say, if the demands for the products are fairly elastic, or the products are good substitutes for other commodities.