Market Demand Elasticity and Income Inequality
This paper deals with the analysis of the relation between aggregate demand for a consumption good and the distribution of income across consumers. We obtain sufficient conditions under which changes in income inequality lead to an increase or decrease in the market demand elasticities. The conditions are satisfied for individual demand functions commonly used in economic models, in particular, for the typical demand functions on luxury goods and necessities.
|Date of creation:||2007|
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|Publication status:||Published in Economic Theory|
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