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Homothetic tastes |
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Homothetic tastesHomothetic preferences.Similar MatchesHomothetic preferencesHomothetic 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. HomotheticHomotheticA function of two or more arguments is homothetic if all ratios of its first partial derivatives depend only on the ratios of the arguments, not their levels. For competitive consumers or producers optimizing subject to homothetic utility or production functions, this means that ratios of goods demanded depend only on relative prices, not on income or scale. Homothetic demandHomothetic demandDemand functions derived from homothetic preferences. The demand functions are not themselves literally homothetic. NonhomotheticNonhomotheticAny function that is not homothetic, but usually applied to consumer preferences that include goods whose shares of expenditure rise (and others that fall) with income. |
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