Household production function
From Free net encyclopedia
Consumers often gain utility not directly from the goods that they purchase, but instead they transform the goods by a household production function into something that they value. The idea was originally proposed by Gary Becker and Kelvin Lancaster in the mid 1960s.
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Examples
A simple example of this is baking a cake. The consumer purchases flour, eggs, and sugar, and then uses some time and their labor to produce a cake. The consumer did not really want the flour or sugar, but they purchased them so that they could produce the cake that they actually wanted.
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