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Law of Demand


  • Michael Jerison
  • John K.-H. Quah


We formulate several laws of individual and market demand and describe their relationship to neoclassical demand theory. The laws have implications for comparative statics and stability of competitive equilibrium. We survey results that offer interpretable sufficient conditions for the laws to hold and we refer to related empirical evidence. The laws for market demand are more likely to be satisfied if commodities are more substitutable. Certain kinds of heterogeneity across individuals make the laws more likely to hold in the aggregate even if they are violated by individuals.

Suggested Citation

  • Michael Jerison & John K.-H. Quah, 2006. "Law of Demand," Discussion Papers 06-07, University at Albany, SUNY, Department of Economics.
  • Handle: RePEc:nya:albaec:06-07

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    References listed on IDEAS

    1. Jerison, Michael, 1999. "Dispersed excess demands, the weak axiom and uniqueness of equilibrium," Journal of Mathematical Economics, Elsevier, vol. 31(1), pages 15-48, February.
    2. John K.-H. Quah, 2000. "The Monotonicity of Individual and Market Demand," Econometrica, Econometric Society, vol. 68(4), pages 911-930, July.
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    7. John K.H. Quah, 2003. "The Law of Demand and Risk Aversion," Econometrica, Econometric Society, vol. 71(2), pages 713-721, March.
    8. Kannai, Yakar, 1989. "A characterization of monotone individual demand functions," Journal of Mathematical Economics, Elsevier, vol. 18(1), pages 87-94, February.
    9. John K.-H. Quah, 1997. "The Law of Demand when Income Is Price Dependent," Econometrica, Econometric Society, vol. 65(6), pages 1421-1442, November.
    10. Evstigneev, I. V. & Hildenbrand, W. & Jerison, M., 1997. "Metonymy and cross-section demand," Journal of Mathematical Economics, Elsevier, vol. 28(4), pages 397-414, November.
    11. Kihlstrom, Richard E & Mas-Colell, Andreu & Sonnenschein, Hugo, 1976. "The Demand Theory of the Weak Axiom of Revealed Preference," Econometrica, Econometric Society, vol. 44(5), pages 971-978, September.
    12. Chiappori, Pierre-Andre, 1985. "Distribution of Income and the "Law of Demand."," Econometrica, Econometric Society, vol. 53(1), pages 109-127, January.
    13. Bewley, Truman, 1977. "The permanent income hypothesis: A theoretical formulation," Journal of Economic Theory, Elsevier, vol. 16(2), pages 252-292, December.
    14. Hardle, Wolfgang & Hildenbrand, Werner & Jerison, Michael, 1991. "Empirical Evidence on the Law of Demand," Econometrica, Econometric Society, vol. 59(6), pages 1525-1549, November.
    15. Xavier Vives, 1987. "Small Income Effects: A Marshallian Theory of Consumer Surplus and Downward Sloping Demand," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 87-103.
    16. Grandmont, Jean-Michel, 1992. "Transformations of the commodity space, behavioral heterogeneity, and the aggregation problem," Journal of Economic Theory, Elsevier, vol. 57(1), pages 1-35.
    17. Chipman, John S., 1977. "An empirical implication of Auspitz-Lieben-Edgeworth-Pareto complementarity," Journal of Economic Theory, Elsevier, vol. 14(1), pages 228-231, February.
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    19. Polterovich, Victor & Mityushin, Leonid, 1978. "Criteria for Monotonicity of Demand Functions," MPRA Paper 20097, University Library of Munich, Germany.
    20. Michael Jerison, 2001. "Demand Dispersion, Metonymy and Ideal Panel Data," Discussion Papers 01-11, University at Albany, SUNY, Department of Economics.
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    Cited by:

    1. Mackowiak, Piotr, 2010. "The existence of equilibrium without fixed-point arguments," Journal of Mathematical Economics, Elsevier, vol. 46(6), pages 1194-1199, November.
    2. Andrés Carvajal & Rahul Deb & James Fenske & John Quah, 2014. "A nonparametric analysis of multi-product oligopolies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 57(2), pages 253-277, October.
    3. Robert R. Routledge, 2009. "Testable implications of the Bertrand model," The School of Economics Discussion Paper Series 0918, Economics, The University of Manchester.
    4. Quah, John K.-H., 2008. "The existence of equilibrium when excess demand obeys the weak axiom," Journal of Mathematical Economics, Elsevier, vol. 44(3-4), pages 337-343, February.

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