Homothetic preferences

created by Kimonade
(thing) by Kimonade (4.1 y) (print)   (I like it!) Mon May 13 2002 at 6:58:41
In international trade theory the concept of community indiffernce curves (CIC)is very interesting. A CIC represents the different bundles of two goods (let's say food and clothing) that produce the same amount of utility for a community. For CICs to exist, individual preferences must be identical and homothetic. Preferences are homothetic when individuals consume the same ratio of clothing to food no matter what their level of income is. Therefore someone making $100,000 would spend the same percentage of their income on food as someone who made $20,000. Of course economists realize this does not hold true for real-life, but economic models rarely do.
Y'know, if you log in, you can write something here, or contact authors directly on the site. Create a New User if you don't already have an account.