The Importance of Being Unimportant: Marshall's Third Rule of Derived Demand

John Peirson

Scottish Journal of Political Economy, 1988, vol. 35, issue 2, 105-14

Abstract: J. R. Hicks's revision of A. Marshall's third rule states that as the price elasticity of demand for a pr oduct is greater/less than the elasticity of substitution, the elasti city of derived demand for a factor of production is positively/negat ively related to the share of the factor in total costs. A simple, cl ear, economic explanation of Hicks's revision is given. The very conf used debate on Marshall's third rule and Hicks's revision is ex-amine d and clarified. Copyright 1988 by Scottish Economic Society.

Date: 1988
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