Theory of Market Demand and Supply

Abstract

In this chapter we shall pursue further a number of topics that we have touched on previously. Our intention is to look closer at the properties of demand and supply curves both for the individual and also for the market. Individual demand and supply is considered in Sections 8.2 and 8.3 whilst Section 8.4 is concerned with market relationships. The next section is concerned with some elementary ideas about equilibrium, in particular how equilibrium can be expressed in terms of excess demand functions. This discussion is preliminary and is a natural stepping stone to some of the more recent discussions of equilibrium. Section 8.5 lays out some recent concepts which are used in discussions of equilibrium. Two concepts are stressed, the normalised price set and the modulated excess demand function. The final section discusses the mathematics of equilibrium points, giving intuitive ideas about the fixed-point theorems of Brouwer and Kakutani. The discussion of equilibrium will be expecially relevant when we come to analyse various models in the next chapter.