Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/147314
Authors: 
Minagawa, Junichi
Upmann, Thorsten
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 6060
Abstract: 
We explore effects of simultaneous price changes for the demand of a group of goods, which we refer to as a compound commodity. Specifically, we consider unit and proportional cost components (e. g., taxes, transportation costs, etc.) imposed on the compound commodity. We find that there is a serious aggregation problem implying that the property of a downward-sloping demand curve does not generally hold for the demand of a compound commodity. Notably, both substitution effects of the unit cost and of the proportional cost for a compound commodity may be unambiguously opposed. Finally, we apply these results to commodity taxation.
Subjects: 
demand for a group of goods
compound commodity
unit and proportional costs
income and substitution effects
Slutsky equation
Giffen goods
JEL: 
D01
D11
H20
Document Type: 
Working Paper

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