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ERIC Number: EJ771286
Record Type: Journal
Publication Date: 2007
Pages: 7
Abstractor: Author
ISBN: N/A
ISSN: ISSN-0022-0485
EISSN: N/A
Differentiable Technology, the Curvature of the Profit Function, and the Response of Supply to Own-Price Changes
Somerville, R. A.
Journal of Economic Education, v38 n2 p222-228 Spr 2007
The author establishes a property of supply for a competitive firm: Assuming differentiability of the production frontier, linearly independent price vectors have disjoint image sets under the supply mapping. This property supports the main results. First, the author drew a simple proof of McFadden's proposition that differentiability of the production frontier is necessary and sufficient for strict quasi-convexity of the profit function. This proposition rules out linearity of the profit function on any subset of price domain, in turn ruling out supply and input-demand functions that are constant and have zero values for all price effects. Second, for discrete price changes, own-price effects in supply are strictly positive, assuming a differentiable technology. In this context, strict convexity of the production set is irrelevant. The author indicates implications for cost and demand theory. (Contains 8 notes and 1 figure.)
Heldref Publications. 1319 Eighteenth Street NW, Washington, DC 20036-1802. Tel: 800-365-9753; Tel: 202-296-6267; Fax: 202-293-6130; e-mail: subscribe@heldref.org; Web site: http://www.heldref.org
Publication Type: Journal Articles; Reports - Descriptive
Education Level: Higher Education
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A
Grant or Contract Numbers: N/A