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On inferior inputs and marginal returns

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  • Paolo Bertoletti
  • Giorgio Rampa

Abstract

An input is inferior if and only if an increase in its price raises all marginal productivities. A sufficient condition for input inferiority under quasi-concavity of the production function is then that there are increasing marginal returns with respect to the other input and a non-positive marginal productivity cross derivative. Thus, contrary to widespread opinion, input “competitiveness” is not needed. We discuss these facts and illustrate them by introducing a class of simple production function functional forms. Our results suggest that the existence of inferior inputs is naturally associated with increasing returns, and possibly strengthen the case for inferiority considerably. Copyright Springer-Verlag 2013

Suggested Citation

  • Paolo Bertoletti & Giorgio Rampa, 2013. "On inferior inputs and marginal returns," Journal of Economics, Springer, vol. 109(3), pages 303-313, July.
    • Handle: RePEc:kap:jeczfn:v:109:y:2013:i:3:p:303-313
    DOI: 10.1007/s00712-012-0294-4
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    References listed on IDEAS

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    3. A. Mantovi, 2013. "On the geometry of luxury," Economics Department Working Papers 2013-EP02, Department of Economics, Parma University (Italy).
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    5. Rocha, Felipe Freitas da & Almeida, Edmar Luiz Fagundes de, 2021. "A general equilibrium model of macroeconomic rebound effect: A broader view," Energy Economics, Elsevier, vol. 98(C).

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    More about this item

    Keywords

    Inferior and normal inputs; Marginal productivity; Homotheticity; D11; D21; D24;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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