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Homothetic preferences |
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Homothetic preferencesTogether with identical preferences, this assumption is used for many propositions in trade theory, in order to assure that consumers with different incomes but facing the same prices will demand goods in the same proportions.Similar MatchesCommunity preferencesCommunity preferencesA set of consumer preferences, analogous to those of an individual as might be represented by a utility function, but representing the preferences of a group of consumers. The existence of well-behaved community preferences requires restrictive assumptions about individual preferences and/or incomes. PreferencesPreferences1. In trade policy, this refers to special advantages, such as lower-than-MFN tariffs, accorded to another country's exports, usually in order to promote that country's development. See GSP. 2. In trade theory, this refers to the attitudes of consumers toward different goods, as represented by a utility function. Some propositions in trade theory use the assumption of identical and/or homothetic preferences. Generalized System of PreferencesGeneralized System of PreferencesTariff preferences for developing countries, by which developed countries let certain manufactured and semi-manufactured imports from developing countries enter at lower tariffs than the same products from developed countries. Identical preferencesIdentical preferencesThe assumption that individuals -- either within a country or in different countries -- have the same preferences. To be useful, since individuals' and countries' incomes may differ, the assumption is often used together with homothetic preferences. |
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