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The Uncompensated Law of Demand: A ‘Revealed Preference’ approach

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  • Franks, Edwin
  • Bryant, William D.A.

Abstract

Milleron and Malinvaud (1974), Mityushin and Polterovich (1978) and others, provide conditions under which the Uncompensated Law of Demand (ULD) holds. These conditions are based on properties of the consumer’s (unobservable) utility function. In this paper we introduce the new idea of a ‘Giffen commodity vector’ and show how, in terms of it and the derivative of a consumer’s inverse demand, a new necessary and sufficient condition for the ULD may be obtained. As both the Giffen vector and a consumer’s inverse demand are observable, this allows us to obtain a ‘Revealed Preference’ style necessary and sufficient condition for the ULD without relying on conditions based on unobservables such as differential or curvature properties of a consumer’s utility function.

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  • Franks, Edwin & Bryant, William D.A., 2017. "The Uncompensated Law of Demand: A ‘Revealed Preference’ approach," Economics Letters, Elsevier, vol. 152(C), pages 105-111.
    • Handle: RePEc:eee:ecolet:v:152:y:2017:i:c:p:105-111
    DOI: 10.1016/j.econlet.2017.01.010
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    References listed on IDEAS

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    1. B. C. Eaton, 2002. "Applied Microeconomic Theory," Books, Edward Elgar Publishing, number 1330.
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    Cited by:

    1. Franks, Edwin & Bryant, William D.A., 2018. "The Uncompensated Law of Demand in an exchange economy," Economics Letters, Elsevier, vol. 168(C), pages 127-131.

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    More about this item

    Keywords

    Uncompensated Law of Demand; Monotone; Giffen commodity vector; Giffen price vector; Inverse demand; Observables;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium

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