Characterizing demand functions with price dependent income

DOI10.1007/S11579-013-0098-5MaRDI QIDQ2452151zbMATH OpenOpenAlexFDO

Authors Marwan Aloqeili

Publication date 30 May 2014

Published in Mathematics and Financial Economics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1007/s11579-013-0098-5

zbMATH Keywords

indirect utilityprice dependent incomeSlutsky matrix

Mathematics Subject Classification ID

Group preferences (91B10) Utility theory (91B16) Consumer behavior, demand theory (91B42)

Review text

The problem investigated in the paper is the analytical characterization of an individual demand function \(x(p)\) (via the Slutsky matrix) when a consumer is limited by his income \(w(p)\) which is dependent of market prices \(p\). The author notes that this problem is connected with the problem of group behavior (with respect to consumption), and up to now only linear dependent `income-prices' \(w(p)\) have been investigated in this setting. The goal of the paper is to generalize known results on arbitrary functions \(w(p)\). The investigation tools are the indirect utility function \[ V\left( {p} \right) = U\left( {x\left( {p} \right)} \right) + \lambda \left( {p} \right)\left( {w\left( {p} \right) - p'x\left( {p} \right)} \right) \] and the envelope theorem, which implies that \[ \frac{{\partial V}}{{\partial p_{i}} } = \lambda \left( {p} \right)\left( {\frac{{\partial w}}{{\partial p_{i}} } - x^{i}\left( {p} \right)} \right),\quad i = 1,\dots,n. \] This formula plays a main role in revealing Slutsky-type conditions of a demand function \(x(p)\) depending on properties of \(w(p)\).

Recommendations

• The characterization of demand and excess demand functions, revisited
• Les relations de Slutsky généralisées
• The Law of Demand When Income Is Price Dependent
• On duality and the benefit function
• The generalized Slutsky relations.

Cites work

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Cited in

(10)

• A characterization of monotone individual demand functions
• Allocation of demand when cost is demand-dependent
• A variant of the Slutsky equation in a dynamical account based model
• Approximating compensated income from ordinary demand functions
• The characterization of demand and excess demand functions, revisited
• On duality and the benefit function
• The inverse problem in convex optimization with linear constraints
• Individual Effects in a System of Demand Functions
• Inverse problem in convex optimization with linear homogeneous constraints
• Prices in the utility function and demand monotonicity

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