This section continues the discussion of the example introduced in the previous section. In this example, the price of some commodity is expected to experience an increase at some date M in the future, but all other prices are expected to be unchanged. The results from this type of model can be used to derive the effect of a price rise that is expected to be permanent, by summing the effects of a set of "partial effects."
In the complementarity case, which as noted in the previous section may involve the investment in additional durable production equipment, the individual increments have the form shown in the figure by the curve AD, and the total effect will have the form shown by the curve BB.
In the case of substitution, for instance of outputs at earlier or later dates in order to have more to sell at a critical date, the effect of a permanent price rise is much less certain, because "the constituent effects are much less simple in character." The author argues that
It is still likely, on the whole, that the main increase in output will come at dates in the further future; so that a resultant such as BB is still the most probable. But variations from the standard form are much more possible; thus the adoption of a production plan such as bb, with some outputs actually less than the corresponding outputs in the original stream, is not ruled out.
The author notes later that "abnormal" effects, such as those shown by the curve bb, are not likely except when "the character of the initial equipment dominates the whole situation."
In this connection he then makes reference to a historical example of South African gold mining in 1934-35, in which extraction of richer ores fell slightly during a time when new capacity was under construction and expected to enter into production shortly. Although the author notes that there is some dispute about these facts on which he does not take a position, he points out that "there is no theoretical reason why it should not have happened like that."
