Abstract
In the direct utility function, quantities axe exogenous, while prices and total expenditure are endogenous. Consequently, this utility function is appropriate for analyzing the impact on prices and total expenditure from an exogenous change in the quantity of a commodity. Such an exogenous change in quantity could occur when quotas change. The direct translog utility function is estimated for a four commodity breakdown of U.S. expenditure. Estimates of quantity elasticities of price and expenditure indicate that domestically produced non-durables are necessities. As a result, the imposition of quotas on these goods will be particularly deleterious to lower income consumers.
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The author is indebted to the referees for their valuable comments on a previous draft.
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Fortune, J.N. Quotas and the structure of consumer demand. Empirical Economics 4, 101–109 (1979). https://doi.org/10.1007/BF01763552
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DOI: https://doi.org/10.1007/BF01763552