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

Edwin Franks*, William D A Bryant

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

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.

Original languageEnglish
Pages (from-to)105-111
Number of pages7
JournalEconomics Letters
Volume152
DOIs
Publication statusPublished - 1 Mar 2017

Keywords

  • Giffen commodity vector
  • Giffen price vector
  • Inverse demand
  • Monotone
  • Observables
  • Uncompensated Law of Demand

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