A Note on the Definition of the Economic Region of the Production Function

A More General Definition of the Economic Region of Production, Permitting Variable Input and Product Prices

“…It should be noted that this interpretation of possible production where E > 1.0 follows from our definition of the production function and implies that one or more fixed inputs have not only been paid for, but must also be fully used, as noted by Johnston and Nelson [6]. According to this result, the economic region could extend considerably into the area where E > 1.0 for variable prices when x, > 0 and A q < O.…”

“…In their very interesting 1969 paper, Seagraves and Pasour [7] clarified several issues and problems related to defining the economic region of production and stimulated further contributions on this subject [5,6]. Although possible effects of variable prices upon the economic region of the production function were mentioned by both Seagraves and Pas our [7] and by Gates [5], they did not propose a formal definition of the precise economic region for the case of variable product and/or variable input prices.…”

“…Johnston and Nelson [6] have suggested that the traditional discussion of "stages of production" should either be dropped or amended to include explicit specifications on the nature of the production function and factor fixity, and the nature of product and factor price relationships [6, p. 109]. We think that treatment of the stages of production should be retained.…”

“…Before doing so, it is necessary to specify clearly the properties of the production function, as noted by Johnston and Nelson [6], and to specify what we mean by the "economic region of production." Before doing so, it is necessary to specify clearly the properties of the production function, as noted by Johnston and Nelson [6], and to specify what we mean by the "economic region of production."…”

“…Admittedly, it is possible to define a production function differently and to include the effect of a fixed factor directly in the production function [6,7]. Further, continuous first and second partial derivatives are assumed for the production function, and the inputs are real variables defined over the non-negative domain of real numbers.…”