The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Rationing

  • J. Peter Neary
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_1848

Abstract

Rationing occurs whenever economic agents face quantity constraints on their demand for or supply of particular commodities. This article reviews the main results of rationing theory: a tightening of a ration constraint raises the demand for unrationed substitutes and reduces the price responsiveness of all unrationed goods (the Le Chatelier effect). It shows how the technique of virtual prices can be used to generalize these results to the case of strictly binding rations, and briefly reviews some applications, empirical and theoretical, of rationing theory to public and environmental economics, fix-price macroeconomics, and the effects of quotas on international trade.

Keywords

Compensated demand Demand price Fixprice macroeconomics Income effects International trade theory Labour supply Le Chatelier principle Nonlinear budget constraints Nonlinear commodity taxation Public goods Quotas Rationing Reservation price Separability Shadow price Substitution effect Uncompensated demand Unemployment Virtual price 

JEL Classifications

D11 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • J. Peter Neary
    • 1
  1. 1.