Elastic supply of capital and labour The supply of labour can be affected by events like migration, shifts in the employment rate, and the availability of jobs. So, labour is highly elastic in supply, generally, in comparison to the absolutely inelastic supply of land. The elasticity of labour can be demonstrated in the Tiebout model. The supply of capital is perfectly elastic, due to the real interest rate. So, the revenue base does not disappear when taxes on capital and labour are cut. Most tax cuts cause land values to increase. Similar principles in other taxes These principles can also be seen in other taxes. Examples are given by Gaffney:[1] Lowering the corporate income tax raises stock prices. Lowering interest rates raises real estate prices. Wartime taxes lower land prices, and peace dividends let them rise again. Criticism Criticism of ATCOR is often criticism of its assumptions. One criticism is that labour and capital are not perfectly elastic, and that this assumption oversimplifies real world economics.