Application of Rotterdam demand system to Irish data

Abstract

A demand model which works in logarithmic first differences is applied to data from the Irish economy to estimate price and income elasticities. Six commodity-groups are used. The results are, on the whole, reasonable and consistent with other evidence. Three of the groups show 'luxury' income elasticities, but only one has a price elasticity greater (in absolute value) than unity. Tests applied to i:he model suggest that, contrary to economic theory, an equal proportionate change in income and all prices will cause a change in the consumption pattern. The response to price changes also seems to be asymmetrical.