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On Marginal Returns and Inferior Inputs

Author

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  • Paolo Bertoletti

    (Department of Economics and Quantitative Methods, University of Pavia)

  • Giorgio Rampa

    (Department of Economics and Quantitative Methods, University of Pavia)

Abstract

A necessary and sufficient condition for an input to be inferior is that, taking into account the input adjustment, an increase of its price raises the marginal productivity of all inputs. Contrary to a widespread opinion, it is not necessary that (some) inputs are “rivals” (i.e., that some marginal productivity cross derivative is negative). We discuss these facts and illustrate them by introducing a few simple functional forms for the production function. Our results suggest that the existence of inferior inputs is naturally associate to the presence of increasing returns, and possibly make the case for inferiority considerably stronger.

Suggested Citation

  • Paolo Bertoletti & Giorgio Rampa, 2011. "On Marginal Returns and Inferior Inputs," Quaderni di Dipartimento 145, University of Pavia, Department of Economics and Quantitative Methods.
    • Handle: RePEc:pav:wpaper:145
    as

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    File URL: http://dem-web.unipv.it/web/docs/dipeco/quad/ps/RePEc/pav/wpaper/q145.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    inferior and normal inputs; marginal productivity; homotheticity.;
    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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