Lancastrian Demand Theory and Linier Expenditure function
Lancastrian demand theory was developed by Australian Economist Kelvin Lancaster. He published an article on Journal of Political Economics in 1966 entitled “ A new approach in consumer theory ” and also published a book called “ Consumer Demand: A new approach ” in 1971. According to Lancaster, A consumer chooses to buy a particular product not only because of its Utility and cost but based on the combination of attributes which includes Taste, color, size, weight, price, etc. Thus, U = f ( Taste, color, price, weight, size, etc. ) He explained it further by taking in consideration of why an individual buys a particular food item. Let consumer buy the food item based on two nutritional factors: Vitamin (a 1 ) and Calories (a 2 ). Suppose there are three items in consumption basket x, y and z. Then, a 1 = a 1 x x + a 1 y y+ a 1 z Z a 2 = a 2 x x+ a 2 y y + a 2 z Z Where, a 1 x = the vitamin obtained from good x a 1 y = he vitamin obtained from good ...