Document Type : Research Paper

Authors

• Zoorar Permeh ¹
• Mohammad Ghorbani ²

¹ Researcher in Institute for Trade Studies and Research

² Assistant Professor, University of Mashhad

Abstract

This paper aims at estimation of own price elasticity, cross price elasticity and elasticity of saving with respect to income and price in the framework of the linear expenditures system (LES). Our findings show that aggregate marginal propensity to expenditure (MPC) is 0.72 beverange, fast food and tobacco products, and housing are 0.098 and 0.08, respectively.  The lowest MPC belongs to flour, cereal and bread with 0.028. Estimated income elasticity of goods and services dedicate that foods (excluding beverage, fast food and tobacco products) are necessity but housing, transportation, communication and entertainment are luxury. The price elasticity of saving reveals that any increase in flour and products, meat, milk and products, edible oils, fruits and vegetables, clothing and footwear will result in a decrease in the saving. The income elasticity of saving is 2.45.

Keywords

• Inflation
• Saving
• Linear Expenditures System (LES). Own Price Elasticity
• Cross Price Elasticity
• Elasticity of Saving with Respect to Income and Price