System of consumer demand equations--an empirical comparison of two functional forms

• Main Author: Rufino, Cesar C.
• Format: text
• Language: English
• Published: Animo Repository 1994
• Subjects: Consumption (Economics); Consumers; Demand functions (Economic theory); Economics > mathematical models; Economics
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/1656
• Institution: De La Salle University

The System-wide Consumer Demand Analysis is one of the most neglected areas of applied research in the local context. This is rather surprising considering the relative importance of Personal Consumption Expenditure to the national economy (PCE traditionally accounts for about 75 percent of the country's Gross Domestic Product).This paper is one of the very few studies about the pattern of behavior of representative Filipino consumer in a multi-commodity set-up. With the objective of determining the ideal model to describe this behavior pattern, the study compared empirically the merits of two of the most theoretically sound, but mathematically rigorous complete systems of demand equations -- The Rotterdam model and the Linear Expenditure System. One unique feature of the study is its use of a quarterly data series (PCE: Q1 1981 -- Q2 1994). Most demand researchers are wary of using consumption data base of lesser frequency than a year because of their belief that demand adjustment to income and price changes requires at least a year to be manifested. This study hoped to shed some light on this issue as well as on other equally important concerns which might have wide ranging practical implications.