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Small Income Effects: A Marshallian Theory of Consumer Surplus and Downward Sloping Demand

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  • Vives, Xavier

Abstract

The author formalizes the Marshallian idea t hat when the proportion of income spent on any commodity is small then the incom e effects are small. If n is the number of goods, the author shows that the orde r of magnitude of the norm of the income derivative of demand is1/an. As a coro llary for the case of a single price change, the percentage error in approximati ng the Hicksian Deadweight Loss by its Marshallian counterpart goes to zero at l east at the rate 1/an and demand is downward sloping for n sufficiently large. Copyright 1987 by The Review of Economic Studies Limited.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of Economic Studies.

Volume (Year): 54 (1987)
Issue (Month): 1 (January)
Pages: 87-103

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Handle: RePEc:bla:restud:v:54:y:1987:i:1:p:87-103

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Cited by:
  1. József Sákovics and Daniel Friedman (University of California at Santa Cruz), 2011. "The marginal utility of money: A modern Marshallian approach to consumer choice," ESE Discussion Papers 209, Edinburgh School of Economics, University of Edinburgh.
  2. Edward Schlee, . "Expected Consumer's Surplus as an Approximate Welfare Measure," Working Papers 2133375, Department of Economics, W. P. Carey School of Business, Arizona State University.
  3. Klaus Ritzberger & Frank Milne, 2002. "Strategic pricing of equity issues," Economic Theory, Springer, vol. 20(2), pages 271-294.
  4. John H. Nachbar, 1996. "The Last Word on Giffen Goods?," GE, Growth, Math methods 9602001, EconWPA.
  5. Ghosal, Sayantan, 2006. "Intertemporal coordination in two-period markets," Journal of Mathematical Economics, Elsevier, vol. 43(1), pages 11-35, December.
  6. Eilon Solan & Nicolas Vieille, 2006. "Equilibrium uniqueness with perfect complements," Economic Theory, Springer, vol. 28(3), pages 721-726, 08.
  7. Giuseppe Freni, 2001. "Sraffa's early contribution to competitive price theory," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 8(3), pages 363-390.
  8. Alex Dickson & Roger Hartley, 2007. "The strategic Marshallian cross," Keele Economics Research Papers KERP 2007/13, Centre for Economic Research, Keele University.
  9. Michael Jerison & John K.-H. Quah, 2006. "Law of Demand," Discussion Papers 06-07, University at Albany, SUNY, Department of Economics.
  10. A. Dickson & R. Hartley, 2005. "The strategic Marshallian cross and bilateral oligopoly," The School of Economics Discussion Paper Series 0523, Economics, The University of Manchester.
  11. Miyake, Mitsunobu, 2006. "On the applicability of Marshallian partial-equilibrium analysis," Mathematical Social Sciences, Elsevier, vol. 52(2), pages 176-196, September.

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