On Interpreting Inverse Demand Systems: A Primal Comparison of Scale Flexibilities and Income Elasticities
Scale flexibilities in inverse demand systems describe how marginal valuations change with expansions in the consumption bundle. Such effects clearly are related to income elasticities in direct demand systems. However, the connection is not so close as it first appears. We argue that the link between scale flexibilities and income elasticities is tight only if preferences are homothetic, a situation where neither measure is interesting, or if all elasticities of substitution are unitary. We make clear the relationship between the two measures in a coordinate system focusing on how marginal rates of substitution change with consumption scale and proportion. Copyright 1999, Oxford University Press.
Year of publication: |
1999
|
---|---|
Authors: | Park, Hoanjae ; Thurman, Walter N. |
Published in: |
American Journal of Agricultural Economics. - Agricultural and Applied Economics Association - AAEA. - Vol. 81.1999, 4, p. 950-958
|
Publisher: |
Agricultural and Applied Economics Association - AAEA |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Park, Hoanjae, (2004)
-
A Bayesian approach to aggregation in demand systems : smoothing with perfect substitution priors
Park, Hoan-jae, (2013)
-
Park, Hoan-jae, (2004)
- More ...