Small Income Effects: A Marshallian Theory of Consumer Surplus and Downward Sloping Demand
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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Volume (Year): 54 (1987)
Issue (Month): 1 (January)
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