Full text: Study week on the econometric approach to development planning

citly for changes in tastes and habits. The version we have 
used so far can be summarised in the following three equations: 
‘IV. 20) 
‘IV. 21) 
‘IV. 22 
In (IV, 20), p denotes a vector of commodity prices and # 
denotes a diagonal matrix formed from this vector; e denotes 
a vector of quantities of the different commodities demanded 
per head of the population; p=p’e denotes total expenditure 
per head; b and c¢ denote vectors of parameters restricted only 
by the fact that ?b=1; and, as usual, ¢ and I denote respec- 
tively the unit vector and the unit matrix. In (IV. 21) and 
(IV. 22), © denotes a particular year; and the starred b's and 
¢’s denote vectors of parameters restricted only by the fact that 
’b* =1 and ¢'b** =o. 
The second row of (IV. 20) makes possible a simple inter- 
pretation of the elements of b and ¢. The elements of ¢ repre- 
sent the components of the average consumer’s basic standard 
of living and are bought whatever values are taken by 7 
and p. When these purchases have been paid for, the amount 
of money left over is 0 - p’c, and this is allocated to the different 
commodities in proportion to the elements of b. 
An obvious criticism of (IV. 20) taken in isolation is that 
the elements of b and c are unlikely to remain constant over 
time. The simplest means of meeting this criticism is set out 
in (IV. 21) and (IV. 22), where the elements of b and c are ali 
made linear functions of time. 
Stone - pag. 51

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