On the Law of Demand. - A mathematically simple descriptive approach for general probability density functions
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
|Date of creation:||30 Nov 2009|
|Contact details of provider:|| Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden|
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- Hardle, Wolfgang & Hildenbrand, Werner & Jerison, Michael, 1991.
"Empirical Evidence on the Law of Demand,"
Econometric Society, vol. 59(6), pages 1525-1549, November.
- Wolfgang Härdle & Werner Hildenbrand & Michael Jerison, 1989. "Empirical Evidence on the Law of Demand," Discussion Paper Serie A 264a, University of Bonn, Germany.
- HARDLE, Wolfgang & HILDENBRAND, Werner & JERISON, Michael, "undated". "Empirical evidence on the law of demand," CORE Discussion Papers RP 968, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- 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,"
Econometric Society, vol. 68(4), pages 911-930, July.
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