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Demand Theory

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The New Palgrave Dictionary of Economics

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Abstract

Demand theory describes and explains individual choice of consumption bundles. Traditional theory considers optimizing behaviour when the consumer’s choice is restricted to consumption bundles that satisfy a budget constraint. The budget constraint is determined by price–income pairs. A demand correspondence assigns to each price–income pair a non-empty set of optimal consumption bundles. A demand function assigns to each price–income pair a unique optimal consumption bundle. Optimality of consumption bundles is based on a preference relation. The theory derives existence and properties of demand correspondences (demand functions) from assumptions on preference relations and, if applicable, their utility representations.

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  1. http://link.springer.com/referencework/10.1057/978-1-349-95121-5

    Volker Böhm & Hans Haller

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  1. Volker Böhm
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  2. Hans Haller
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Böhm, V., Haller, H. (2018). Demand Theory. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_539

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