Interaction of Income and Price in Consumer Demand

WE CONSIDER consumlier demiiand and distinguish between homogeneous goods on the one hand and composite commodities on the other. By a good we mean a specific variety or brand, sold at a single price; its representatives are indistinguishable in. use. If, from the consumers' point of view, the quantities of several goods can be sensibly added together, such goods belong to the same commodity. It is quite common to sum pounds of pears and pounds of apples to make pounds of fruit, but one hesitates to add oranges and lemons as well; the practice (which is by and large restricted to food items) apparently requires that the goods concerned are close substitutes, apart from the evident need that they have the same quantity measure. While most demand studies refer to commodities, our interest is in goods and we consider demand functions that relate the quantity of the j-th good qj to its relative price pj, to real income ,e and to any other variables z. Restricting the pertinent variables to positive values we may write these demand functions as