Hierarchic Demand and the Engel Curve for Variety

Abstract

Ahstract-The usual treatment of consumer demand theory assumes a solution to the demand equations with positive quantities of all commodities. This paper characterises a class called hierarchic demand systems for which only a subset of commodities are in the purchased set. The hierarchic linear expenditure svstem is used to illustrate interesting properties of such systems. The empirical section shows how the number of commodities purchased expands with total expenditure both in aggregate and for commodity groups. The data clearly establish the empirical importance of corner solutions and of the purchase decision in demand studies.

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