Economics, 3rd Edition

The Mobility of Factors of Production 

Consider a farmer whose land is currently devoted to producing 

wheat. A sharp rise in the price of rape seed might encourage the farmer to switch use of land from wheat 

to rape seed relatively easily. The mobility of the factor of production land, in this case, is relatively high 

and so supply of rape seed may be relatively elastic.

A number of multinational firms that have plants in different parts of the world now build each plant to 

be identical. What this means is that if there is disruption to one plant the firm can more easily transfer 

operations to another plant elsewhere and continue production ‘seamlessly’. Car manufacturers provide 

another example of this interchangeability of parts and operations. The chassis, for example, may be 

identical across a range of branded car models. This is the case with some Audi, Volkswagen, Seat and 

Skoda models. This means that the supply may be more elastic as a result.

Compare this to the supply of highly skilled oncology consultants. An increase in the wages of oncology 

consultants (suggesting a shortage exists) will not mean that a renal consultant or other doctors can sud-

denly switch to take advantage of the higher wages and increase the supply of oncology consultants. In 

this example, the mobility of labour to switch between different uses is limited and so the supply of these 

specialist consultants is likely to be relatively inelastic.