Summary and Conclusions
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As previously mentioned, the basic model of this study differs from previous two-sector models in its assumption that the consumer divides his income, not only between saving and consumption, but among different types of consumption goods. While the first division is made on the basis of the traditional constant propensity to save, the second is made on the basis of price and income elasticities of demand. The income elasticity of demand for manufactures is assumed to be no less than one, the income elasticity of agriculture no more than one. This assumption is similar to that used in the neoclassical terms of trade models; it differs from them in its inclusion of saving.
KeywordsDemand Function Relative Price Income Elasticity Relative Prex Demand Condition
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