Abstract
Rationing occurs whenever economic agents face quantity constraints on their demand for or supply of particular commodities. This article reviews the main results of rationing theory: a tightening of a ration constraint raises the demand for unrationed substitutes and reduces the price responsiveness of all unrationed goods (the Le Chatelier effect). It shows how the technique of virtual prices can be used to generalize these results to the case of strictly binding rations, and briefly reviews some applications, empirical and theoretical, of rationing theory to public and environmental economics, fix-price macroeconomics, and the effects of quotas on international trade.
Keywords
- Compensated demand
- Demand price
- Fixprice macroeconomics
- Income effects
- International trade theory
- Labour supply
- Le Chatelier principle
- Nonlinear budget constraints
- Nonlinear commodity taxation
- Public goods
- Quotas
- Rationing
- Reservation price
- Separability
- Shadow price
- Substitution effect
- Uncompensated demand
- Unemployment
- Virtual price
JEL Classifications
This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume
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Neary, J.P. (2008). Rationing. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_1848-2
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DOI: https://doi.org/10.1057/978-1-349-95121-5_1848-2
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Publisher Name: Palgrave Macmillan, London
Online ISBN: 978-1-349-95121-5
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