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Simple Analytics of Productive Consumption

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  • Wing Suen
  • Pak Hung Mo

Abstract

The shadow price of a productive good is equal to its money price less its marginal product. As more of the good is consumed, its shadow price rises because of diminishing productivity and the consumer's full income also rises because the marginal product is positive. The direction of the overall bias induced by endogenous prices and income is found to be determinate. The authors demonstrate that the demand for productive goods tends to be relatively unresponsive to exogenous changes in prices and income. Similarly, labor supply will be relatively unresponsive to wage and unearned income if market work causes fatigue. Copyright 1994 by University of Chicago Press.
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Suggested Citation

  • Wing Suen & Pak Hung Mo, 1993. "Simple Analytics of Productive Consumption," Departmental Working Papers _030, Chinese University of Hong Kong, Department of Economics.
    • Handle: RePEc:chk:cuhked:_030
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    References listed on IDEAS

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    Cited by:

    1. Ichiroh Daitoh & Kazuo Nishimura, 2019. "Productive Consumption Hypothesis and a Two-Sector Model of Economic Development," Keio-IES Discussion Paper Series 2019-007, Institute for Economics Studies, Keio University.
    2. Contoyannis, Paul & Jones, Andrew M., 2004. "Socio-economic status, health and lifestyle," Journal of Health Economics, Elsevier, vol. 23(5), pages 965-995, September.
    3. Palmer-Jones, Richard & Jackson, Cecile, 1997. "Work intensity, gender and sustainable development," Food Policy, Elsevier, vol. 22(1), pages 39-62, February.
    4. Hamermesh, Daniel S. & Meng, Xin & Zhang, Junsen, 2002. "Dress for success--does primping pay?," Labour Economics, Elsevier, vol. 9(3), pages 361-373, July.
    5. Mullahy, John & Sindelar, Jody, 1996. "Employment, unemployment, and problem drinking," Journal of Health Economics, Elsevier, vol. 15(4), pages 409-434, August.
    6. Radim Valencik & Petr Wawrosz, 2019. "Economics of Productive Consumption as an Offshoot of Main Currents of Economic Theory," ACTA VSFS, University of Finance and Administration, vol. 13(2), pages 113-134.
    7. Chavas, Jean-Paul, 2013. "On the microeconomics of food and malnutrition under endogenous discounting," European Economic Review, Elsevier, vol. 59(C), pages 80-96.
    8. Hiroaki Hayakawa, 2017. "Health-conscious consumer behavior," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 7(1), pages 1-31, April.

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