Motivation
Early results by Antonelli (1886) and Nataf (1953) had shown that, assuming all individuals face the same prices in a market, their income consumption curves and their Engel curves should be parallel straight lines. Gorman's first published paper in 1953 developed these ideas in order to answer the question of generalizing a society to a single individual.
In 1961, Gorman published a short, four-page paper in Metroeconomica which derived an explicit expression for the functional form of preferences which give rise to linear Engel curves. Briefly, an individual's resulting expenditure function must be affine with respect to utility :
- ,
where both and are homogeneous of degree one in prices (, a vector). This homogeneity condition is trivial, as otherwise would not give linear Engel curves.
and have nice interpretations: is the expenditure needed to reach a reference utility level of zero for each individual, while is the price index which deflates the excess money income needed to attain a level of utility . It is important to note that is the same for every individual in a society.
Read more about this topic: Gorman Polar Form
Famous quotes containing the word motivation:
“Self-determination has to mean that the leader is your individual gut, and heart, and mind or we’re talking about power, again, and its rather well-known impurities. Who is really going to care whether you live or die and who is going to know the most intimate motivation for your laughter and your tears is the only person to be trusted to speak for you and to decide what you will or will not do.”
—June Jordan (b. 1939)