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On the Law of Demand. - A mathematically simple descriptive approach for general probability density functions

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  • Larsson, Lars-Göran

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

In this paper we assume that choice of commodities at the individual (household) level is made inside the budget set and that the choice can be described by a probability density function. We prove that law of demand()0xExp is valid for one(x) or two choice variables (x, y)*. The law of demand at the market level is valid by summation. We use general probabilistic density functions p(x), p(x, y) defined over the bounded budget set to calculate E(x) and prove law of demand. The expected demand functions are homogeneous of degree zero in prices and income(,,)xyppm.The commodities x and y are normal goods**. The present approach is less complex in a mathematical sense compared to other approaches and is descriptive in its nature. Why not keep descriptions as simple as possible? Entia non sunt multiplicanda praetor necessitatem Beings ought not to be multiplied except out of necessity “Occam´s razor” Encyclopedia Brittannica

Suggested Citation

  • Larsson, Lars-Göran, 2009. "On the Law of Demand. - A mathematically simple descriptive approach for general probability density functions," Working Papers in Economics 396, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0396
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    File URL: http://hdl.handle.net/2077/21488
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    References listed on IDEAS

    as
    1. John K.-H. Quah, 2000. "The Monotonicity of Individual and Market Demand," Econometrica, Econometric Society, vol. 68(4), pages 911-930, July.
    2. Hildenbrand, Werner, 1983. "On the "Law of Demand."," Econometrica, Econometric Society, vol. 51(4), pages 997-1019, July.
    3. Hardle, Wolfgang & Hildenbrand, Werner & Jerison, Michael, 1991. "Empirical Evidence on the Law of Demand," Econometrica, Econometric Society, vol. 59(6), pages 1525-1549, November.
    4. Shone, R., 1975. "Microeconomics," Elsevier Monographs, Elsevier, edition 1, number 9780126413502 edited by Shell, Karl.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Law of Demand and other properties of consumer demand; Microeconomics; Consumer theory; Consumer behaviour; Choice described in random terms; Expected individual and market demand;
    All these keywords.

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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