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Comparative Statics for a Consumer with Possibly Multiple Optimum Consumption Bundles

11 Pages Posted: 22 Mar 2010  

Indraneel Dasgupta

Durham University - Department of Economics and Finance; IZA Institute of Labor Economics

Prasanta K. Pattanaik

University of California, Riverside (UCR) - Department of Economics

Abstract

Non-positivity of the generalized substitution effect, non-positivity of the own-price substitution effect, homogeneity of degree zero in all prices and income, and the law of demand are some of the most primitive comparative static results in the standard revealed preference theory of consumersï¾’ behaviour. These results are however derived for demand functions. The literature does not have corresponding comparative static results for the more plausible case of demand correspondences, where the consumer is permitted to have multiple chosen bundles in a given price-income situation. Using the revealed preference approach to the theory of consumers' behaviour, this note establishes such results for demand correspondences; the analysis can be readily adapted to prove corresponding results in the preference-based approach.

Keywords: demand correspondence, weak axiom of revealed preference, non-positivity of generalized substitution effect, non-positivity of own-price substitution effect, homogeneity of degree zero, law of demand

JEL Classification: D11

Suggested Citation

Dasgupta, Indraneel and Pattanaik, Prasanta K., Comparative Statics for a Consumer with Possibly Multiple Optimum Consumption Bundles. IZA Discussion Paper No. 4818. Available at SSRN: https://ssrn.com/abstract=1575851

Indraneel Dasgupta (Contact Author)

Durham University - Department of Economics and Finance ( email )

Durham, DH1 3HY
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Prasanta K. Pattanaik

University of California, Riverside (UCR) - Department of Economics ( email )

900 University Avenue
4136 Sproul Hall
Riverside, CA 92521
United States
909-787-5037 x1592 (Phone)
909-787-5685 (Fax)

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