Abraham Subotnik

Welfare Implications of Stabilizing Consumption and Production

Some economists are now urging the use of buffer stocks to help stabilize farm and food prices. Moreover, price stabilization has been shown to be socially beneficial from a theoretical point of view. Our purpose is to analyze the welfare implications of stabilized consumption and production and to compare them with the known implications of stabilized prices. It is shown that stabilized consumption is the least beneficial in its welfare implications. The relation between the gains from stabilization and the size of buffer stocks necessary to achieve stabilization also is analyzed. Finally, the presentation is extended to cover instability due to fluctuations in export demand.

Regulation effects on resource allocation of a utility-maximizing firm

Abstract The literature on the effects of rate of return regulation on the allocation of resources was mostly devoted to the classical case of a profit-maximizing monopolist. An attempt is made in this paper to extend the analysis to a firm who maximizes a utility function with profits and revenue as arguments. We prove that a meaningful presentation of the regulation effects implies the formulation of two constraints. Whether the firm over-or undercapitalizes depends on whether the constraint is imposed as an upper or a lower limit. The higher the profit motive the higher the capital-labor ratio and the marginal rate of substitution between labor and capital.

The relationship between revenue, production and demand functions, and the implications for some microeconomic problems

Abstract The properties of concave revenue functions (in input terms) are often of considerable importance in the theory of the firm. One reason for this is the similarity between the sufficient conditions for an interior maxima (the requirement that the Hessian matrix be negative semidefinite) and the necessary and sufficient conditions for concavity. However, the concavity assumption imposes severe restrictions on the production and demand functions which apparently have not been acknowledged in the literature. It is the purpose of this note to explore these restrictions and to point out their implications for a proper formulation of some microeconomic problems.

Short and Long Run Elasticities in Consumer Demand Theory

Contrary to statements frequently made in the literature, the own elasticity of demand is not necessarily smaller in the short run than in the long run. It is also shown that the availability of new commodities will not necessarily increase the own elasticity of demand for the existing commodities.