Tuesday, 28 August 2018

The Systems of Consumer Demand Analysis: A Review: (CIACR) - Lupine Publishers

For several decades both theoretical and empirical economist have shown interest in consumers behavior and regarding consumer's preferences has increased our understanding enormously. This paper is based on the comparative assessment of the demand system selected; the Linear Expenditure System fails to describe consumers demand behavior as specified by Engel's-Law. With the increasing expenditures, inferior commodities lean towards luxuries which are not plausible. So, for food demand analysis the LES is not appropriate. With utility maximizing behavior the Rotterdam is not consistent even if corresponds-to-generally- accepted-empirical-facts-and-is flexible (e.g. the substitutive or complementary relationship among goods and demand description for inferior commodities, necessities and luxuries). The parametric restrictions given by AIDS and Indirect Trans log System, theoretical properties of demand function can be imposed. Both systems depict generally empirical facts and are derived from flexible function from. However, estimation process may become difficult due to relatively high number of independent parameters the Indirect Tans log System. Linear Approximate Almost Ideal Demand System are much simpler in estimation and linear in parameters and therefore, LA/AIDS can be widely applied as basic model for empirical studies.

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