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EconJohn
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Throughout microeconomic literature i see the following restiriction placed on the nature of elasticities in demand system estimation.

This being for some arbitarary good $x$ we require price elasticities and income elasticities to be:

$$\varepsilon(x,p_x)+\varepsilon(x,p_y)+\varepsilon(x,I)=1$$$$\varepsilon(x,p_x)+\varepsilon(x,p_y)+\varepsilon(x,I)=0$$

What is the proof for this? (I cant seem to find it).

Throughout microeconomic literature i see the following restiriction placed on the nature of elasticities in demand system estimation.

This being for some arbitarary good $x$ we require price elasticities and income elasticities to be:

$$\varepsilon(x,p_x)+\varepsilon(x,p_y)+\varepsilon(x,I)=1$$

What is the proof for this? (I cant seem to find it).

Throughout microeconomic literature i see the following restiriction placed on the nature of elasticities in demand system estimation.

This being for some arbitarary good $x$ we require price elasticities and income elasticities to be:

$$\varepsilon(x,p_x)+\varepsilon(x,p_y)+\varepsilon(x,I)=0$$

What is the proof for this? (I cant seem to find it).

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EconJohn
  • 8.8k
  • 6
  • 33
  • 68

Proof for homogeneity of elasticities

Throughout microeconomic literature i see the following restiriction placed on the nature of elasticities in demand system estimation.

This being for some arbitarary good $x$ we require price elasticities and income elasticities to be:

$$\varepsilon(x,p_x)+\varepsilon(x,p_y)+\varepsilon(x,I)=1$$

What is the proof for this? (I cant seem to find it).