Household production function

Consumers often choose not directly from the commodities that they purchase but from commodities they transform into goods through a household production function. It is these goods that they value. The idea was originally proposed by Gary Becker, Kelvin Lancaster, and Richard Muth in the mid-1960s. The idea was introduced simultaneously into macroeconomics in two separate papers by Jess Benhabib, Richard Rogerson, and Randall Wright (1991); and Jeremy Greenwood and Zvi Hercowitz (1991).

Example

A simple example of this is baking a cake. The consumer purchases flour, eggs, and sugar and then uses labor and time producing a cake. The consumer did not really want the flour, sugar, or eggs, but purchased them to produce the cake for consumption (instead of buying it, e.g., from a bakery).

See also

• Family economics
• New Home Economics

Further reading

• (HUP descr.)
• Abstract.