A Production Function with an Inferior Input: Comment
AbstractEpstein and Spiegel (2000) have discussed a production function in which one input is inferior: an increase in the target level of output reduces the quantity of the input demanded. This paper provides a more straightforward proof that the input in question is inferior. This proof has the added advantage that, unlike the proof of Epstein and Spiegel, it is based on the firm's cost minimization problem. It thus emphasizes the connection between the firm's cost minimization problem and the issue of input inferiority. It is also shown that, if we treat the Epstein-Spiegel functional form as a utility function rather than a production function, then the inferior good can exhibit Giffen behavior. Copyright 2001 by Blackwell Publishers Ltd and The Victoria University of Manchester
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Bibliographic InfoArticle provided by University of Manchester in its journal Manchester School.
Volume (Year): 69 (2001)
Issue (Month): 6 (December)
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- Peter Moffatt & Keith Moffatt, 2011. "Mirror utility functions and reflexion properties of various classes of goods," University of East Anglia Applied and Financial Economics Working Paper Series 031, School of Economics, University of East Anglia, Norwich, UK..
- Kris De Jaegher, 2008.
"Benchmark Two-Good Utility Functions,"
University of Manchester, vol. 76(1), pages 44-65, 01.
- Moffatt, Peter G., 2002. "Is Giffen behaviour compatible with the axioms of consumer theory?," Journal of Mathematical Economics, Elsevier, vol. 37(4), pages 259-267, July.
- Paolo Bertoletti & Giorgio Rampa, 2011. "On Marginal Returns and Inferior Inputs," Quaderni di Dipartimento 145, University of Pavia, Department of Economics and Quantitative Methods.
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