Input Price-Input Quantity Relations and the Numéraire

Abstract

The fact that a competitive agent faces ‘given’ input prices does not necessarily mean that these prices can be completely arbitrary, especially in the long run. An obvious case, but not the only one, is when there are input-output relations among industries. But as soon as long-run input price interrelatedness is taken seriously, the very conception of a downward sloping input demand curve encounters serious difficulties. Although one can always draw an input price-input quantity relation, its main qualitative property-the sign of its slope-is not generally independent of the arbitrary choice of numéraire.

Keywords: Input demand, Long run, Input prices

JEL Classification: D21, D24, D57