In this section the author begins his discussion of the case in which the elasticity of expectations is unity; that is, the case in which (as noted in the previous section) "a change in current price will change expected prices in the same direction and in the same proportion."
The auther takes note of two relevant insights from the study of statics. First, a group of commodities with the same elasticity of expectation can be analyzed as a single commodity. Second, regarding the production plan of a firm, if the elasticity of expectations is unity, a rise in the price of some commodity X will mean that "there will be an increase in the output of X, brought about either by increased inputs of one sort or another, at one time or another, or by substitution at the expense of other products."
Although a rise in price of a commodity will lead to an increase in planned output of that commodity, the increase may not materialize immediately. The author notes that limits on capacity and inventory will mean that flexibility of output in response to an increase in price will be small in the near term. "But," he notes, "there is no such check on the expansion of distant future outputs, or rather the check gets less and less strong as the output recedes into the future."
The author closes this section by indicating that the upcoming section will explore "Marshall's doctrine of the 'short' and 'long' periods."
