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A System of Demand Equations Satisfying Effectively Global Curvature Conditions *
Author(s) -
COOPER RUSSEL J.,
McLAREN KEITH R.,
PARAMESWARAN PRIYA
Publication year - 1994
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.1994.tb01822.x
Subject(s) - curvature , flexibility (engineering) , range (aeronautics) , unit (ring theory) , parametric statistics , function (biology) , representation (politics) , economics , parametric equation , mathematical optimization , mathematics , mathematical economics , engineering , statistics , geometry , management , mathematics education , evolutionary biology , politics , political science , law , biology , aerospace engineering
The MP1GLOG specification of an indirect utility function allows a parametric representation in terms of expenditure and two unit cost functions. An appropriate specification of these unit cost functions resolves the conflict between the need for flexibility and satisfaction of curvature restrictions by allowing the use of a flexible unit cost function which satisfies curvature conditions for all positive prices. The resulting demand system will then satisfy curvature restrictions over a wide range of prices and expenditures, and hence allow policy conclusions consistent with the restrictions of economic theory.