Producer Decision and Input Demand Theory: An Axiomatic Approach

This chapter is concerned with an axiomatic approach to input demand theory. By help of general production possibility sets, we intend to derive decomposition equations in input demand theory, which have been rather neglected so far in the economics literature. Special attention is paid to important comparison between the firm’s expansion effect and the consumer’s income effect. We discuss the question of how and to what extent the expansion effect is distinct from the income effect. In this connection, the LeChatelier–Samuelson principle is also discussed.