On the Function Coefficient, Euler's Theorem, and Homogeneity in Production Theory

Bruce R. Beattie, Matthew Holt and Myles J. Watts

Review of Agricultural Economics, 2002, vol. 24, issue 1, 240-249

Abstract: This paper makes three related points useful in teaching first-year graduate production theory. First, the local applicability of the classical function coefficient idea for short-run nonhomogeneous production technologies is shown for returns to scale, satisfaction of second-order and total conditions for profit maximization, and delineation of the economic region of production in factor space. Second, the general applicability of Euler's Theorem results to nonhomogeneous (variable-proportional-return) cases is developed. Lastly, it is shown that short-run, nonhomogeneous production/yield functions are fully consistent with long-run linear homogeneity.

Date: 2002
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