Income inequality and price elasticity of market demand: the case of crossing Lorenz curves
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Author(s)
Ibragimov, M
Ibragimov, R
Kattuman, P
Ma, J
Type
Journal Article
Abstract
This paper extends Ibragimov and Ibragimov (Econ Theory 32:579–587,
2007) in which the effect of changes income inequality on the price elasticity of
market demand is characterized for the class of income distribution changes occurring
through non-intersecting Lorenz curve shifts. We derive sufficient conditions
for increase/decrease in price elasticity of market demand, under general changes in
income distribution, allowing Lorenz curves to intersect as they shift. We conclude by
drawing out implications of different types of tax policy changes for demand elasticity.
2007) in which the effect of changes income inequality on the price elasticity of
market demand is characterized for the class of income distribution changes occurring
through non-intersecting Lorenz curve shifts. We derive sufficient conditions
for increase/decrease in price elasticity of market demand, under general changes in
income distribution, allowing Lorenz curves to intersect as they shift. We conclude by
drawing out implications of different types of tax policy changes for demand elasticity.
Date Issued
2018-05-01
Date Acceptance
2017-02-07
Citation
Economic Theory, 2018, 65 (3), pp.729-750
ISSN
0938-2259
Publisher
Springer Verlag
Start Page
729
End Page
750
Journal / Book Title
Economic Theory
Volume
65
Issue
3
Copyright Statement
© The Author(s) 2017. This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
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Subjects
Social Sciences
Economics
Business & Economics
Income distribution
Inequality
Downside inequality aversion
Transfer sensitivity
Market demand elasticity
Direct tax policy
1401 Economic Theory
Economic Theory
Publication Status
Published
Date Publish Online
2017-02-27