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A short and intuitive proof of Marshall's rule


Ewerhart, Christian (2003). A short and intuitive proof of Marshall's rule. Economic Theory, 22(2):415-418.

Abstract

When the price of an input factor to a production process increases, then the optimal output level declines and the input is substituted by other factors. Marshall's rule is a formula that determines the own-price elasticity for one factor as a weighted sum of the elasticities of output market demand and factor substitution. This note offers a proof for Marshall's rule that is significantly shorter and somewhat more intuitive than existing derivations.

Abstract

When the price of an input factor to a production process increases, then the optimal output level declines and the input is substituted by other factors. Marshall's rule is a formula that determines the own-price elasticity for one factor as a weighted sum of the elasticities of output market demand and factor substitution. This note offers a proof for Marshall's rule that is significantly shorter and somewhat more intuitive than existing derivations.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:2003
Deposited On:06 Apr 2010 11:20
Last Modified:21 Nov 2017 14:49
Publisher:Springer
ISSN:0938-2259
Publisher DOI:https://doi.org/10.1007/s00199-002-0291-x

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