Changing input costs in competitive markets with variable quality

This article analyzes the impact of changing input prices on quantity, quality and price in a competitive market. Quality is represented by means of a utility-bearing characteristic for which the household technology is linear. The impact of a change in input prices depends, in ways elucidated in the article, on demand and on firms' profit- maximizing tradeoffs between quantity and quality. Conditions are presented under which an increase in input prices leads to a decrease in output price and an increase in quantity (this with or without inferior inputs), an increase in price and quality and a decrease in quantity, and other outcomes.