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Consumer Demand—Theory

In: Market Interrelationships and Applied Demand Analysis

Author

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  • Michael K. Wohlgenant

    (North Carolina State University)

Abstract

The neoclassical theory of consumer behavior is the conceptual basis for the demand analysis framework formulated in this book. In this chapter, general comparative static results using the primal approach are derived in order to account for all factors affecting consumer behavior. The main result is the Fundamental Demand Matrix of Consumer Demand (Barten, 1964), giving comparative static results for Marshallian, Hicksian, and Frischian demand functions for changes in prices, income, and preference shift variables. Comparative static results are derived for both general quasi-concave preferences and strictly concave preferences. The main results are the Slutsky equation and general restrictions of consumer behavior. For Frischian demand functions, specific and general substitution effects are derived. Preference shift variables are shown to be proportional to price effects. Comparative static results are also derived using duality theory, and the theory of inverse demand functions is presented.

Suggested Citation

  • Michael K. Wohlgenant, 2021. "Consumer Demand—Theory," Palgrave Studies in Agricultural Economics and Food Policy, in: Market Interrelationships and Applied Demand Analysis, chapter 0, pages 5-19, Palgrave Macmillan.
    • Handle: RePEc:pal:psachp:978-3-030-73144-1_2
    DOI: 10.1007/978-3-030-73144-1_2
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