The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Law of Demand

  • Michael Jerison
  • John K. -H. Quah
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_2413

Abstract

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.

Keywords

Asymmetric information Bernoulli utility function Cobb–Douglas preferences Comparative statics Compensated demand Engel curve Giffen effects Giffen goods Income effect Jacobian matrix Law of demand Lyapunov’s second theorem Marginal utility of income Metonymy Non-decreasing dispersion of excess demand Portfolio choice Risk aversion Slutsky matrix Stability of equilibrium Substitution effect Tâtonnement Uniqueness of equilibrium 

JEL Classifications

D1 D5 C62 D01 D11 D21 G11 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Michael Jerison
    • 1
  • John K. -H. Quah
    • 1
  1. 1.