Rationing, Income Effects and Supply Response: A Theoretical Note

Timothy Besley

Oxford Economic Papers, 1988, vol. 40, issue 2, 378-89

Abstract: This note looks at the effect of rationing on supply response in a model of an agent who both produces and consumes. The author shows th at if the Le Catelier principle is to be violated, it must be because income effects are powerful; since in their absence the supply respon se is always positive. The model here is shown to be related to a model of entrepreneurship and income effects in the theory of the firm analyzed by Jan de V. Graaff some years ago. Copyright 1988 by Royal Economic Society.

Date: 1988
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