On Marginal Returns and Inferior Inputs
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.
|Date of creation:||May 2011|
|Contact details of provider:|| Postal: Via S. Felice, 5 - 27100 Pavia|
Web page: http://dipartimenti.unipv.eu/on-dip/epmq/Home.html
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Epstein, Gil S & Spiegel, Uriel, 2000. "A Production Function with an Inferior Input," Manchester School, University of Manchester, vol. 68(5), pages 503-515, September.
- Leroux, Alain, 1987. "Preferences and normal goods: A sufficient condition," Journal of Economic Theory, Elsevier, vol. 43(1), pages 192-199, October.
- Takayama,Akira, 1985. "Mathematical Economics," Cambridge Books, Cambridge University Press, number 9780521314985, October.
- Cornes,Richard, 1992. "Duality and Modern Economics," Cambridge Books, Cambridge University Press, number 9780521336017, October.
- Cowell, Frank A., 2006. "Microeconomics: Principles and Analysis," OUP Catalogue, Oxford University Press, number 9780199267774.
- H. A. John Green, 1961. "Direct Additivity And Consumers' Behaviour," Oxford Economic Papers, Oxford University Press, vol. 13(2), pages 132-136.
- Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, October.
- Weber, Christian E, 2001. "A Production Function with an Inferior Input: Comment," Manchester School, University of Manchester, vol. 69(6), pages 616-622, December.
- Fisher, Franklin M., 1990. "Normal goods and the expenditure function," Journal of Economic Theory, Elsevier, vol. 51(2), pages 431-433, August.
- Paolo Bertoletti, 2005. "Elasticities of Substitution and Complementarity: A Synthesis," Journal of Productivity Analysis, Springer, vol. 24(2), pages 183-196, October.
When requesting a correction, please mention this item's handle: RePEc:pav:wpaper:145. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paolo Bonomolo)
If references are entirely missing, you can add them using this form.