286 THE GENERAL THEORY OF EMPLOYMENT bk. v

If e 0 = o or if e w = i, output will be unaltered and priceswill rise in the same proportion as effective demand interms of money. Otherwise they will rise in a smallerproportion.

ii

Let us return to the employment function. Wehave assumed in the foregoing that to every level ofaggregate effective demand there corresponds a uniquedistribution of effective demand between the productsof each individual industry. Now, as aggregate ex-penditure changes, the corresponding expenditure onthe products of an individual industry will not, ingeneral, change in the same proportion;—partly be-cause individuals will not, as their incomes rise, increasethe amount of the products of each separate industry,which they purchase, in the same proportion, and partlybecause the prices of different commodities will re-spond in different degrees to increases in expenditureupon them.

It follows from this that the assumption upon whichwe have worked hitherto, that changes in employmentdepend solely on changes in aggregate effective de-mand (in terms of wage-units), is no better than a firstapproximation, if we admit that there is more than oneway in which an increase of income can be spent. Forthe way in which we suppose the increase in aggregatedemand to be distributed between different commodi-ties may considerably influence the volume of employ-ment. If, for example, the increased demand is largelydirected towards products which have a high elasticityof employment, the aggregate increase in employmentwill be greater than if it is largely directed towards pro-ducts which have a low elasticity of employment.

In the same way employment may fall off withoutthere having been any change in aggregate demand, ifthe direction of demand is changed in favour of pro-ducts having a relatively low elasticity of employment.