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Sato's Insight on the Relationship between the Frisch 'Parameter' and the Average Elasticity of Substitution



This short note demonstrates that Sato's 1972 insight concerning the equivalence between Frisch's 'money flexibility' parameter and the average elasticity of substitution among commodities needs to be modified if it is to be applied to non-homothetic utility functions. Fortunately the modification is easily implemented.

Suggested Citation

  • Alan A. Powell, 1992. "Sato's Insight on the Relationship between the Frisch 'Parameter' and the Average Elasticity of Substitution," Centre of Policy Studies/IMPACT Centre Working Papers g-99, Victoria University, Centre of Policy Studies/IMPACT Centre.
  • Handle: RePEc:cop:wpaper:g-99

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    References listed on IDEAS

    1. Sato, Kazuo, 1972. "Additive Utility Functions with Double-Log Consumer Demand Functions," Journal of Political Economy, University of Chicago Press, vol. 80(1), pages 102-124, Jan.-Feb..
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    Cited by:

    1. Alan A. Powell & Keith R. McLaren & K.R. Pearson & Maureen T.Rimmer, 2002. "Cobb-Douglas Utility - Eventually!," Centre of Policy Studies/IMPACT Centre Working Papers ip-80, Victoria University, Centre of Policy Studies/IMPACT Centre.
    2. Clements, Kenneth W., 2008. "Price elasticities of demand are minus one-half," Economics Letters, Elsevier, vol. 99(3), pages 490-493, June.
    3. Snow, Arthur & Warren, Ronald S., 2015. "Pigou’s Law and the proportionality of income and price elasticities of demand," Economics Letters, Elsevier, vol. 132(C), pages 136-138.

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis


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