Consumer Budgets and Price Indices
Consumer Budgets and Price Indices
This is the most ambitious of the papers in Part I of the book that are explicitly concerned with budgeting; it is from an unpublished typescript dated 1965. Here, Gorman discards the previously maintained hypothesis of separability and attempts to discover the implications of perfect price aggregation itself. Specifically, in the notation of this paper, he looks for the conditions under which a consumer with a well‐behaved utility function can determine the optimal intersector allocations. Sect. 2 of the paper solves this problem by deriving the necessary and sufficient conditions on the indirect utility function and develops this in various ways. The remaining sections add an assumption on price aggregation, and a requirement that the demand functions are derived from conditional subutility functions.
Keywords: budgeting, consumer budgets, demand functions, intersectoral allocation, perfect price aggregation, price aggregation, price indices, separability, subutility functions, utility functions
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