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Switching of Techniques and Consumption Per Head: An Economic Clarification
Quarterly Journal of Economics
Using the notation of our original paper,' we summarize different techniques by (nXn) input matrices a, b, c, . . . and the corresponding labor requirement vectors ao, bo, ... When one sets the wage w=1 as a normalization, the price vector Pa, associated with any technique a, is a function of the interest rate r: (1) pa(r)=ao[I-(1+r)a]I . [In equilibrium, prices exactly cover costs, pa= ao (direct labor costs) + (1 +r)pa (cost, including interest, of inputs, i.e., circulating capital); (1)doi:10.2307/1879436 fatcat:f7jzcygucfeydcafunzotelilm