ConsumerDemand_Lectures_Estimation_2perpage

ConsumerDemand_Lectures_Estimation_2perpage - Econ 1002:...

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Unformatted text preview: Econ 1002: Applied Economics Matthew Wakefield University College London and Institute for Fiscal Studies m.wakefield (at) ucl.ac.uk Jan - Mar 2009 Oce Hour: Tues 3-3.55, Room 209, Drayton www.ucl.ac.uk/economics/degree-courses/undergraduate/course-list/courses/econ1002 coursepage or link from: www.ucl.ac.uk/economics/degree-courses/undergraduate/course-list/courses/applied-economics Thanks to the previous two lecturers, Professors Ian Preston and James Banks, for much of the content of this course. Econ 1002 Matthew Wakefield Outline Estimation 4th Feb 2-Log Shares Summary Consumer Demand Study of how individuals/households allocate their scarce resources between goods in a given period. That is, of how much consumers spend on each good And what determines these choices Matthew Wakefield (UCL/IFS) Econ 1002 Jan - Mar 2009 2 / 22 Econ 1002 Matthew Wakefield Outline Estimation 4th Feb 2-Log Shares Summary Outline III: Consumer Demand 1 Estimation 4th Feb Double-Log Demand Equation Budget Share Specification 2 Summary Matthew Wakefield (UCL/IFS) Econ 1002 Jan - Mar 2009 3 / 22 Econ 1002 Matthew Wakefield Outline Estimation 4th Feb 2-Log Shares Summary Estimation In estimation want to find out about: Income Elasticities (Inferior / Normal; Necessity/Luxury) Own Price Elasticities (Price Elastic / Inelastic) Cross-price Elasticities (Substitutes / Complements) Also want exibility to control for demographic characteristics: May have specific interest in inuence of certain characteristics. Matthew Wakefield (UCL/IFS) Econ 1002 Jan - Mar 2009 4 / 22 Econ 1002 Matthew Wakefield Outline Estimation 4th Feb 2-Log Shares Summary Estimation Must therefore choose a functional form (for linking quantity purchased to prices, income/budget, and demographics) that: Allows restrictions / points of theory to be tested Maintains ease of interpretation Allows exibility in controlling for demographics We will consider two functional forms: Double Log Demand Equation aka log-linear or constant elasticity equation Budget Share Specification Matthew Wakefield (UCL/IFS) Econ 1002 Jan - Mar 2009 5 / 22 Econ 1002 Matthew Wakefield Outline Estimation 4th Feb 2-Log Shares Summary Estimation To estimate and demand equation, need data on: Spending/purchases Incomes/budgets Demographics/Household characteristics Prices Richest source on first three: Household expenditure surveys (cross section) To get price variation, may need to merge several years (repeat cross sections), unless have household specific prices Matthew Wakefield (UCL/IFS) Econ 1002 Jan - Mar 2009 6 / 22 Econ 1002 Matthew Wakefield Outline Estimation 4th Feb 2-Log Shares Summary Estimation 4th Feb Have taken brief tour of demand theory Factors such as income, prices and demographics affect...
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ConsumerDemand_Lectures_Estimation_2perpage - Econ 1002:...

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