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Income inequality and price elasticity of market demand: the case of crossing Lorenz curves

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Title: Income inequality and price elasticity of market demand: the case of crossing Lorenz curves
Authors: Ibragimov, M
Ibragimov, R
Kattuman, P
Ma, J
Item 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.
Issue Date: 1-May-2018
Date of Acceptance: 7-Feb-2017
URI: http://hdl.handle.net/10044/1/54012
DOI: https://dx.doi.org/10.1007/s00199-017-1037-0
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.
Keywords: Social Sciences
Business & Economics
Income distribution
Downside inequality aversion
Transfer sensitivity
Market demand elasticity
Direct tax policy
1401 Economic Theory
Economic Theory
Publication Status: Published
Online Publication Date: 2017-02-27
Appears in Collections:Imperial College Business School