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| Demand System Estimation× | Almost Ideal Demand System× | |
|---|---|---|
| Field | Economics | Economics |
| Family | Regression model | Regression model |
| Year of origin≠ | 1954 | 1980 |
| Originator≠ | Richard Stone (linear expenditure system); developed by Deaton, Muellbauer, Theil, Barten | Angus Deaton & John Muellbauer |
| Type≠ | System of structural demand equations estimated jointly | Flexible complete demand system in budget-share form |
| Seminal source≠ | Stone, R. (1954). Linear expenditure systems and demand analysis: an application to the pattern of British demand. The Economic Journal, 64(255), 511–527. DOI ↗ | Deaton, A., & Muellbauer, J. (1980). An almost ideal demand system. The American Economic Review, 70(3), 312–326. link ↗ |
| Aliases | Consumer Demand System, System of Demand Equations, Complete Demand System, Demand System Analysis | AIDS, Deaton-Muellbauer Demand System, LA-AIDS, Almost Ideal Demand Model |
| Related | 3 | 3 |
| Summary≠ | Demand system estimation jointly models how a consumer or population allocates a budget across a complete set of goods, estimating a system of equations — one per good — that relate each good's expenditure share or quantity to all prices and total expenditure. Unlike a single-equation demand curve, a demand system imposes the cross-equation restrictions implied by consumer theory: adding-up (shares sum to the budget), homogeneity (no money illusion), and Slutsky symmetry (consistency of cross-price effects). Classic functional forms include Stone's Linear Expenditure System, the Rotterdam model, and the Almost Ideal Demand System, and the system is estimated with seemingly unrelated regression or full-information methods. | The Almost Ideal Demand System (AIDS), introduced by Angus Deaton and John Muellbauer in 1980, is the workhorse flexible demand system in applied microeconomics. It models each good's budget share as a linear function of the logarithms of all prices and of log real total expenditure, derived from a flexible (PIGLOG) cost function. The form is 'almost ideal' because it satisfies the axioms of choice exactly, aggregates consistently over heterogeneous consumers, has a functional form that is a first-order approximation to any demand system, and can be estimated and tested for homogeneity and symmetry with linear regression once a price index is specified. |
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