Income and Price Effects in Intertemporal Consumer Problems

Dragone Davide () and Vanin Paolo ()
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Dragone Davide: Department of Economics, 9296 University of Bologna , Piazza Scaravilli 2, 40126, Bologna, Italy
Vanin Paolo: Department of Economics, 9296 University of Bologna , Piazza Scaravilli 2, 40126, Bologna, Italy

The B.E. Journal of Theoretical Economics, 2025, vol. 25, issue 1, 119-135

Abstract: We study income and price effects for intertemporal consumer problems with monetary and non-monetary dynamic constraints. We focus on short and long-run responses to a permanent change in income or price, and we characterize how such responses depend on the law of motion of non-monetary dynamic constraints and on time discounting. We provide a dynamic analog to the Slutsky equation, and we show the conditions under which the elasticity of demand to income or price is smaller in the long than in the short run, or even has opposite sign.

Keywords: income and price elasticity; dynamic Slutsky equation; taxes and transfers (search for similar items in EconPapers)
JEL-codes: D11 D91 I00 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1515/bejte-2025-0022

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