Money illusion, Gorman and Lau

Colby, Scott and Tim, Graciano and Jeffrey, LaFrance and Rulon, Pope (2011): Money illusion, Gorman and Lau.

Abstract

Any demand equation satisfying Lau’s (1982) Fundamental Theorem of Exact Aggregation and is 0° homogeneous in prices and income will have a Gorman (1981) functional form for each income term. This property does not depend on symmetry or adding up. The implications of this result are illustrated by an extensive example.

• Item Type: MPRA Paper
• Language: English
• Keywords: Demand, exact aggregation, functional form, homogeneity
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory; D - Microeconomics > D0 - General > D01 - Microeconomic Behavior: Underlying Principles

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