On the Law of Demand. - A mathematically simple descriptive approach for general probability density functions
AbstractIn 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()0xExpis 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 âOccamÂ´s razorâ Encyclopedia Brittannica
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Bibliographic InfoPaper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 396.
Length: 11 pages
Date of creation: 30 Nov 2009
Date of revision:
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Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Law of Demand and other properties of consumer demand; Microeconomics; Consumer theory; Consumer behaviour; Choice described in random terms; Expected individual and market demand;
Find related papers by 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-11 (All new papers)
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- Hardle, Wolfgang & Hildenbrand, Werner & Jerison, Michael, 1991.
"Empirical Evidence on the Law of Demand,"
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- HARDLE, Wolfgang & HILDENBRAND, Werner & JERISON, Michael, . "Empirical evidence on the law of demand," CORE Discussion Papers RP -968, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Wolfgang HÃ¤rdle & Werner Hildenbrand & Michael Jerison, 1989. "Empirical Evidence on the Law of Demand," Discussion Paper Serie A 264a, University of Bonn, Germany.
- Haerdle,W. Hildenbrand,W. Jerison,M., 1988. "Empirical evidence on the law of demand," Discussion Paper Serie A 193, University of Bonn, Germany.
- John K.-H. Quah, 2000.
"The Monotonicity of Individual and Market Demand,"
Econometrica, Econometric Society,
Econometric Society, vol. 68(4), pages 911-930, July.
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