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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] |
