Arbeitspapier

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.

Language
Englisch

Bibliographic citation
Series: Quaderni di Dipartimento ; No. 145

Classification
Wirtschaft
Consumer Economics: Theory
Firm Behavior: Theory
Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
Subject
inferior and normal inputs
marginal productivity
homotheticity

Event
Geistige Schöpfung
(who)
Bertoletti, Paolo
Rampa, Giorgio
Event
Veröffentlichung
(who)
Università degli Studi di Pavia, Dipartimento di Economia Politica e Metodi Quantitativi (EPMQ)
(where)
Pavia
(when)
2011

Handle
Last update
12.07.2024, 1:21 PM CEST

Object type

  • Arbeitspapier

Associated

  • Bertoletti, Paolo
  • Rampa, Giorgio
  • Università degli Studi di Pavia, Dipartimento di Economia Politica e Metodi Quantitativi (EPMQ)

Time of origin

  • 2011

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