Income distribution and demand elasticity (original) (raw)
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Income Distribution, Price Elasticity and the 'Robinson Effect
The Manchester School, 2004
In The Economics of Imperfect Competition, Joan Robinson argued that an increase of the consumers' incomes should make demand less elastic { which, though reasonable about individual demand as an assumption on preferences, suggests a role for income distribution as far as market demand is concerned. We model increases in aggregate income as¯rst-order stochastic dominance shifts of the income distribution, and use Esteban's (1986) income share elasticity to provide su±cient conditions on income distribution that support the`Robinson e®ect' { i.e., such that a negative (positive) relationship between indivual income and price elasticity translates into a negative (positive) relationship between mean income and market demand elasticity. The paper also provides a framework to study the e®ects of distributive shocks on the price elasticity of market demand. JEL Classi¯cation no: D31, D40
A Note on Income Share Elasticity and Stochastic Dominance
SSRN Electronic Journal, 2002
Esteban (1986) introduced the notion of income share elasticity as a function ¼ which can describe the size distribution of income. On the other hand, indices of¯rst or second order stochastic dominance are widely used to describe shifts in income distribution, to which inequality measures are attached. The paper draws a link between the two, by providing conditions such that a given shift to ¼ is equivalent to a¯rst or second order stochastic dominance shift of the distribution of income. JEL Classi¯cation no: D31
Income share elasticity and the price elasticity of demand
Quaderni Del Dipartimento Di Scienze Economiche E Matematico Statistiche Dell Universita Del Salento Collana Di Economia, 2001
the whole range of p-the sign of´µ in area D is clearly still ambigous. Sorting this out would enable us to determine the behaviour of´over the whole range of p. The properties of the income distribution which deliver uniqueness of b p are discussed in the next section.
Agricultural Economics (Zemědělská ekonomika), 2012
The paper is focused on the derivation of the mathematical relationship among the income-elasticity level of the entire market demand and the income-elasticity values of the demand functions of the consumers’ groups buying on the defined market. The determination of the mathematical term was based on the linearity of the relevant demand functions. Under the linearity assumption, the income elasticity coefficient of the entire market demand equals the weighted sum of the income-demand elasticities of the differentiated consumer groups buying on the given market. The weights in the aggregation formula are defined as the related demand shares, i.e. as the proportions of the groups’ demands to the entire market demand. The derived aggregation equation is quite held if no demand interactions (e.g. the snob or fashion effect) are recorded among differentiated consumers’ groups. The derived formula was examined by using empirical data about the consumer behaviour of Czech households in the...
Market Demand and Income Distribution: a Theoretical Exploration
Bulletin of Economic Research, 1997
This paper sets out to explore theoretically how a change in the distribution of disposable income affects the market demand for a good or service. With the help of only minimal information on the shape of the Engel curve and the transition from one distribution to the other, a variety of empirically relevant constellations are identified in which the size (or mean income) effect on market demand is counteracted by the distributional effect. Since the determining factors are expressed by relations between summary statistics, the results at the same time provide theoretically sound restrictions on economic approaches to market demand analysis. 7 In fact, these four scenarios correspond to ones investigated by and using the (generalized) Lorenz methodology.
PLOS ONE, 2016
Income and price elasticity of demand quantify the responsiveness of markets to changes in income and in prices, respectively. Under the assumptions of utility maximization and preference independence (additive preferences), mathematical relationships between income elasticity values and the uncompensated own and cross price elasticity of demand are here derived using the differential approach to demand analysis. Key parameters are: the elasticity of the marginal utility of income, and the average budget share. The proposed method can be used to forecast the direct and indirect impact of price changes and of financial instruments of policy using available estimates of the income elasticity of demand.
Metroeconomica, 2000
We analyze the direction of the co-movements of price and output in a monopolistic market when an expansive shock occurs. Price and quantity patterns are shown to depend on the consumers' income distribution. In particular, a low degree of income dispersion is associated with price and quantity reacting in opposite directions to demand shocks. Ã We thank two anonymous referees who provided very helpful comments. We also thank
Personal income distribution and market demand
Quaderni Del Dipartimento Di Scienze Economiche E Matematico Statistiche Dell Universita Del Salento Collana Di Economia, 2001
We model income distribution as a continuous di¤erentiable unimodal density function f (y; µ), de…ned over some positive interval (y m ; y M), 0 • y m < y M • 1. The parameter µ is a mean preserving spread. As is well known, in probability theory this is a measure of the degree of riskiness of a distribution.