Gross substitutes

The term gross substitutes is used in two slightly different meanings:

  1. In microeconomics, two commodities X and Y are called gross substitutes, if \frac{\Delta \text{demand}(X)}{\Delta \text{price}(Y)} >  0. I.e., an increase in the price of one commodity causes people to want strictly more of the other commodity, since the commodities can substitute each other (bus and taxi are a common example).
  2. In competitive equilibrium theory (general equilibrium theory), a valuation function is said to have the gross substitutes (GS) property if for all pairs of commodities: \frac{\Delta \text{demand}(X)}{\Delta \text{price}(Y)}\geq 0. I.e., the definition includes both substitute goods and independent goods, and only rules out complementary goods. See Utility functions on indivisible goods#Gross substitutes.

References

{{Cite journal|doi=10.1016/0304-4068(83)90032-0|title=Gross substitutability of point-to-set correspondences|journal=Journal of Mathematical Economics|volume=11|issue=2|pages=117|year=1983|last1=Polterovich|first1=V.M.|last2=Spivak|first2=V.A.}}</ref>; -webkit-column-width: [1]; column-width: [1]; list-style-type: decimal;">
  1. 1 2 Polterovich, V.M.; Spivak, V.A. (1983). "Gross substitutability of point-to-set correspondences". Journal of Mathematical Economics 11 (2): 117. doi:10.1016/0304-4068(83)90032-0.
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