Income concentration and market demand |
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Authors: | Benassi, Corrado Chirco, Alessandra Scrimitore, Marcella |
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Affiliation: | Dipartimento di Scienze Economiche, Università di Bologna, Piazza Scaravilli 2, 40126 Bologna, Italy; email: benassi{at}economia.unibo.it Dipartimento di Scienze Economiche e Matematico-Statistiche, Università di Lecce Dipartimento di Scienze Economiche e Matematico-Statistiche, Università di Lecce |
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Abstract: | We analyze the effects of income concentration and income dispersionon market demand and its elasticity. We show that, followingan increase in income concentration towards the middle (measuredby variations in mean preserving spread), the increase in demandfaced by firms which serve at the margin middle income consumers,is associated with an increase in price elasticityaccordingly,the positive effects of the size of the market becoming widerare amplified by a higher degree of competition. Our resultshold for a large number of possible income distributions. |
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