Differential Technology, the Curvature of the Profit Function, and the Response of Supply to Own-Price Changes

Publication: Journal of Economic Education

Volume: Volume 38, No. 2

Issue: Spring 2007

Pages: 222-228

Author(s): R. A. Somerville

Address:

R. A. Somerville

Fellow

Department of Economics

Trinity College Dublin

Dublin 2

Ireland

Phone: (353) 1 608 1043

Fax: (353) 1 677 2503

Internet Address: rsomrvll@tcd.ie

Title: Differential Technology, the Curvature of the Profit Function, and the Response of Supply to Own-Price Changes

Abstract: The author provides a proof of McFadden’s proposition that differentiability of the production frontier is necessary and sufficient for strict quasi-convexity of the profit function.  For discrete price-changes, the author shows own-price effects in supply are strictly positive, assuming a differentiable technology.