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Income and Price Effects in Intertemporal Consumer Problems

Author

Listed:
  • Dragone Davide

    (Department of Economics, 9296 University of Bologna , Piazza Scaravilli 2, 40126, Bologna, Italy)

  • Vanin Paolo

    (Department of Economics, 9296 University of Bologna , Piazza Scaravilli 2, 40126, Bologna, Italy)

Abstract

We study income and price effects for intertemporal consumer problems with monetary and non-monetary dynamic constraints. We focus on short and long-run responses to a permanent change in income or price, and we characterize how such responses depend on the law of motion of non-monetary dynamic constraints and on time discounting. We provide a dynamic analog to the Slutsky equation, and we show the conditions under which the elasticity of demand to income or price is smaller in the long than in the short run, or even has opposite sign.

Suggested Citation

  • Dragone Davide & Vanin Paolo, 2025. "Income and Price Effects in Intertemporal Consumer Problems," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 25(1), pages 119-135.
    • Handle: RePEc:bpj:bejtec:v:25:y:2025:i:1:p:119-135:n:1009
    DOI: 10.1515/bejte-2025-0022
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    More about this item

    Keywords

    income and price elasticity; dynamic Slutsky equation; taxes and transfers;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I00 - Health, Education, and Welfare - - General - - - General

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