SFB 303 Discussion Paper No. A - 108

Author: Grodal, Birgit, and Werner Hildenbrand
Title: Cross Section Engel, Curves Expenditure Distributions and the "Law of Demand"
Abstract: In this paper we shall use two traditional concepts of applied demand analysis in order to analyse some fundamental properties of the market demand function of a large consumption sector. These concepts are- the cross-section Engelcurve- the distribution of households` total expenditure. Both concepts have been used and critically analysed in Hendrik S. Houthakker`s theoretical contributions and empirical analysis. See, for example, Houthakker`s monographs (1955), (1966) and the publications (1953), (1957) and (1961).We shall show in this paper that the shape of the various cross-section Engelcurves as well as the shape of the expenditure distribution plays an important role in deriving the Law of Demand for the market demand function. The shape of a cross- section Engelcurve and the expenditure distribution is, of course, an empirical matter. Consequently, an empirical analysis of cross-section Family Expenditure Surveys is required. To this field of empirical research Houthakker made numerous and well-known fundamental contributions.
Creation-Date: Revised July 1991
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