New model revolutionizes consumer choice understanding, reshaping economic welfare measurements.
The article introduces a new model for consumer choices that considers how total demand is determined. Unlike traditional models where consumers are assumed to only buy one unit, this model allows for more flexibility in consumer behavior. By incorporating this into the full utility maximization framework, the researchers were able to derive the indirect utility function of a representative consumer and calculate price elasticities. This new approach provides a better understanding of consumer behavior and allows for measuring welfare more accurately.