A Note on the Envelope Theorem

Dassiou, X. & Glycopantis, D. (2017). A Note on the Envelope Theorem. Economics Letters, 150, pp. 77-82. doi: 10.1016/j.econlet.2016.11.006

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The purpose of this note is to discuss the envelope relationship between long run and short run cost functions. It compares the usually presented relationship with one of different form and implications, resulting from a simple production function and constant prices. It points out in particular that the tangency condition between the short and long run total cost functions does not necessarily hold always. The note also shows that a given value of the fixed factor might support in the long run a whole range of levels of output.

Item Type: Article
Additional Information: © 2017, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Uncontrolled Keywords: Short run; Long run; Marginal cost; Average cost; Envelope theorem; Corner solutions
Subjects: H Social Sciences > HB Economic Theory
Divisions: School of Social Sciences > Department of Economics
URI: http://openaccess.city.ac.uk/id/eprint/15697

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