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Almost Ideal Demand System
The Almost Ideal Demand System (AIDS) is a consumer demand model used primarily by economists to study consumer behavior. The AIDS model gives an arbitrary second-order approximation to any demand system and has many desirable qualities of demand systems. For instance it satisfies the axioms of order, aggregates over consumers without invoking parallel linear Engel curves, is consistent with budget constraints, and is simple to estimate. Model The AIDS model is based on a first specification of a cost/expenditure function c(u,p): :\log(c(u,p))=\alpha_+\sum_\alpha_\log(p_)+\frac\sum_\sum_\gamma_^\log(p_)\log(p_)+u\beta_\prod_p_^ where ''p'' stand for price of L goods, and ''u'' the utility level. This specification satisfies homogeneity of order 1 in prices, and is a second order approximation of any cost function. From this, demand equations are derived (using Shephard's lemma), but are however simpler to put in term of budget shares w_i = \frac : : w_=\alpha_+\sum_\gamma_\lo ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Preference (economics)
In economics and other social sciences, preference is the order that an agent gives to alternatives based on their relative utility. A process which results in an "optimal choice" (whether real or theoretical). Preferences are evaluations and concern matters of value, typically in relation to practical reasoning. The character of the preferences is determined purely by a person's tastes instead of the good's prices, personal income, and the availability of goods. However, people are still expected to act in their best (rational) interest. Rationality, in this context, means that when individuals are faced with a choice, they would select the option that maximizes self-interest. Moreover, in every set of alternatives, preferences arise. The belief of preference plays a key role in many disciplines, including moral philosophy and decision theory. The logical properties that preferences possess have major effects also on rational choice theory, which has a carryover effect on all mode ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Engel Curve
In microeconomics, an Engel curve describes how household expenditure on a particular good or service varies with household income. There are two varieties of Engel curves. Budget share Engel curves describe how the proportion of household income spent on a good varies with income. Alternatively, Engel curves can also describe how real expenditure varies with household income. They are named after the German statistician Ernst Engel (1821–1896), who was the first to investigate this relationship between goods expenditure and income systematically in 1857. The best-known single result from the article is Engel's law which states that as income grows, spending on food becomes a smaller share of income; therefore, the share of a household's or country's income spent on food is an indication of their affluence. Shape Graphically, the Engel curve is represented in the first quadrant of the Cartesian coordinate system. Income is shown on the horizontal axis and the quantity demanded fo ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Expenditure Function
In microeconomics, the expenditure function gives the minimum amount of money an individual needs to spend to achieve some level of utility, given a utility function and the prices of the available goods. Formally, if there is a utility function u that describes preferences over ''n '' commodities, the expenditure function :e(p, u^*) : \textbf R^n_+ \times \textbf R \rightarrow \textbf R says what amount of money is needed to achieve a utility u^* if the ''n'' prices are given by the price vector p. This function is defined by :e(p, u^*) = \min_ p \cdot x where :\geq(u^*) = \ is the set of all bundles that give utility at least as good as u^*. Expressed equivalently, the individual minimizes expenditure x_1p_1+\dots +x_n p_n subject to the minimal utility constraint that u(x_1, \dots , x_n) \ge u^*, giving optimal quantities to consume of the various goods as x_1^*, \dots x_n^* as function of u^* and the prices; then the expenditure function is :e(p_1, \dots , p_n ; u^*)=p ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Utility
As a topic of economics, utility is used to model worth or value. Its usage has evolved significantly over time. The term was introduced initially as a measure of pleasure or happiness as part of the theory of utilitarianism by moral philosophers such as Jeremy Bentham and John Stuart Mill. The term has been adapted and reapplied within neoclassical economics, which dominates modern economic theory, as a utility function that represents a single consumer's preference ordering over a choice set but is not comparable across consumers. This concept of utility is personal and based on choice rather than on pleasure received, and so is specified more rigorously than the original concept but makes it less useful (and controversial) for ethical decisions. Utility function Consider a set of alternatives among which a person can make a preference ordering. The utility obtained from these alternatives is an unknown function of the utilities obtained from each alternative, not the sum of ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Shephard's Lemma
Shephard's lemma is a major result in microeconomics having applications in the theory of the firm and in consumer choice. The lemma states that if indifference curves of the expenditure or cost function are convex, then the cost minimizing point of a given good (i) with price p_i is unique. The idea is that a consumer will buy a unique ideal amount of each item to minimize the price for obtaining a certain level of utility given the price of goods in the market. The lemma is named after Ronald Shephard who gave a proof using the distance formula in his book ''Theory of Cost and Production Functions'' (Princeton University Press, 1953). The equivalent result in the context of consumer theory was first derived by Lionel W. McKenzie in 1957. It states that the partial derivatives of the expenditure function with respect to the prices of goods equal the Hicksian demand functions for the relevant goods. Similar results had already been derived by John Hicks (1939) and Paul Samuels ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Slutsky Equation
The Slutsky equation (or Slutsky identity) in economics, named after Eugen Slutsky, relates changes in Marshallian (uncompensated) demand to changes in Hicksian (compensated) demand, which is known as such since it compensates to maintain a fixed level of utility. There are two parts of the Slutsky equation, namely the substitution effect, and income effect. In general, the substitution effect can be negative for consumers as it can limit choices. He designed this formula to explore a consumer's response as the price changes. When the price increases, the budget set moves inward, which also causes the quantity demanded to decrease. In contrast, when the price decreases, the budget set moves outward, which leads to an increase in the quantity demanded. The substitution effect is due to the effect of the relative price change while the income effect is due to the effect of income being freed up. The equation demonstrates that the change in the demand for a good, caused by a price ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Angus Deaton
Sir Angus Stewart Deaton (born 19 October 1945) is a British economist and academic. Deaton is currently a Senior Scholar and the Dwight D. Eisenhower Professor of Economics and International Affairs Emeritus at the Princeton School of Public and International Affairs and the Economics Department at Princeton University. His research focuses primarily on poverty, inequality, health, wellbeing, and economic development. In 2015, he was awarded the Nobel Memorial Prize in Economic Sciences for his analysis of consumption, poverty, and welfare. Biography Deaton was born in Edinburgh, Scotland. He attended Hawick High School and then Fettes College as a foundation scholar, working at Portmeirion hotel in summer 1964. He earned his B.A., M.A. and Ph.D. degrees at the University of Cambridge, the last with a 1975 thesis entitled ''Models of Consumer Demand and Their Application to the United Kingdom'' under the supervision of Richard Stone''.'' At Cambridge, he was later a fellow a ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
John Muellbauer
John Norbert Joseph Muellbauer, FBA (born 17 July 1944) is a British applied economist who is a professor at the University of Oxford. He holds several positions at Oxford University including an ''Official Fellowship'' at Nuffield College and a professorship and senior fellowship at the Institute for New Economic Thinking. He also is a fellow not only of the British Academy, but also of the Econometric Society The Econometric Society is an international society of academic economists interested in applying statistical tools to their field. It is an independent organization with no connections to societies of professional mathematicians or statisticians. ..., the Centre for Economic Policy Research (CEPR) and of the European Economic Association (EEA). In 2014, Muellbauer wrote a famous call for a 'quantitative easing for people' in the Eurozone. Selected publications Deaton, A & Muellbauer, J (1980) ''Economics and Consumer Behaviour'', Cambridge University Press Deaton, ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Demand
In economics, demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given time. The relationship between price and quantity demand is also called the demand curve. Demand for a specific item is a function of an item's perceived necessity, price, perceived quality, convenience, available alternatives, purchasers' disposable income and tastes, and many other options. Factors influencing demand Innumerable factors and circumstances affect a consumer's willingness or to buy a good. Some of the common factors are: The price of the commodity: The basic demand relationship is between potential prices of a good and the quantities that would be purchased at those prices. Generally, the relationship is negative, meaning that an increase in price will induce a decrease in the quantity demanded. This negative relationship is embodied in the downward slope of the consumer demand curve. The assumption of a negative relationship is reaso ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Microeconomics
Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics focuses on the study of individual markets, sectors, or industries as opposed to the national economy as whole, which is studied in macroeconomics. One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and allocate limited resources among alternative uses. Microeconomics shows conditions under which free markets lead to desirable allocations. It also analyzes market failure, where markets fail to produce efficient results. While microeconomics focuses on firms and individuals, macroeconomics focuses on the sum total of economic activity, dealing with the issues of growth, inflation, and unemployment and with national policies relating to these issues. Microeconomics also deal ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
