Questions tagged [demand]

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Questions about demand curve as marginal benefit curve

I understand that the demand curve can be viewed as a marginal benefit curve in that, for a given quantity, the price needed for that quantity to be demanded will be equal to the marginal benefit of ...
firstnamelastname45341's user avatar
5 votes
1 answer
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Question on Isolating The Wealth Effect in Analysis of Changes in Price-Wealth Combinations - MWG Exercise 2.F.3 Parts (e) and (f)

I am doing exercises in Chapter 2 of MWG. I feel I got completely lost in exercise 2.F.3 parts (e) and (f). $\textbf{Exercise}$ Here is the question: I have solved parts (a) to (d). In particular, I ...
Shenron's user avatar
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2 votes
1 answer
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Multiplicative (Self-reinforcing) BIAS in Cross-Price Elasticity

I have been trying to estimate cross-price elasticity of demand on market optimum data by simple regression such as: $$ln(x_i) = \beta_0 + \beta_i ln(P_i) + \sum_j^J \beta_j \cdot ln(P_j) + \epsilon$$ ...
Athaeneus's user avatar
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PED and Stealing

Let's assume the price of bread is high. It's PED is <1 so it's inelastic. As an owner of a bakery and a capitalist, people have started to steal bread from my bakery as it's a necessity. Where is ...
Advay's user avatar
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2 votes
2 answers
276 views

Ensuring positive shares in homothetic demand system estimation

I am performing a demand system estimation, and a counter-factual exercise which involves estimating demands at prices quite far from the observed ones. I know a priori that preferences are homothetic,...
cfp's user avatar
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0 answers
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Collusive Price Leadership

In the paper "Collusive Price Leadership" by Julio J. Rotemberg and Garth Saloner in The Journal of Industrial Economics, Vol. 39, No. 1 (Sep., 1990), pp. 93-111, the following statement is ...
Anthony Chen-Zhong-Huang-Jun's user avatar
2 votes
0 answers
27 views

Find a choice function such that WARP or SARP is violated

WARP implies choice function is raionalizable. Say we have a choice function $C(B)$, $B$ is a closed convex compact set. I am looking for a intuitive example of $C$. The $C$ is economic meaningful, ...
High GPA's user avatar
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1 answer
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Showing UMP and EMP do not exhibit duality if the assumption of local non-satiation is absent

I have been trying to use the contradiction method to prove this, but it does not seem to be working. Suppose $x^*$ is optimal in both EMP and UMP. Then $u(x^*) \geq u(x')$ for all $x'$ in $B_pw$. And ...
pacmanscuriousbloob's user avatar
0 votes
2 answers
198 views

Marshallian demand for x^2+y^2

My question is regarding a simple marshallian demand calculation. Given a utility function $u(x,y)=x^2+y^2$ and a budget constraint $p_1x+p_2y=m$. What are the Marshallian demand functions for each x ...
Neil B's user avatar
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1 vote
1 answer
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Change in Hicksian Demand of an Inferior Good when changing Utility

How can you rigorously show that Hicksian demand for an inferior good will decrease when utility increases? Thanks,
Peter Luu's user avatar
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How to isolate cross-price elasticities for a price increase across a portfolio of substitutable products?

My business offers a portfolio of 4 products which are substitutes for one another. Over the years, we have increased the prices of these products by varying amounts, such that we can estimate the ...
Josh's user avatar
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1 answer
33 views

why is increasing price not more profitable when the demand is unitary elastic?

according to the theory (if p-p1=q-q1), the total revenue remains the same because the demand decreases by the same percentage price does. If this is the elasticity of a product, the company ...
wjkrkdfjkn's user avatar
1 vote
1 answer
48 views

Price elasticity of demand when total expenditure is constant

I was recently given the following question: assuming that a consumer's total expenditure for a good does not change when the price of that good declines, what is the price elasticity of that consumer'...
asdf's user avatar
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Give bundles $x,y\in \mathbb R^n$, there must exist a budget $B\supset\{x,y\}$ and a demand $D(B)\in[x,y]$?

For a problem in revealed preference. Give bundles $x,y\in \mathbb R^n$, must there exist a budget $B\supset\{x,y\}$ and a demand $D(B)\in[x,y]$? Intuitively, this mean that we have two bundles, and ...
dodo's user avatar
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3 votes
1 answer
39 views

How to prove Paasche index is less or equal to CPI if preferences are homothetic?

Given that $$CPI=\frac{e(p^1,u^0)}{e(p^0,u^0)}$$ and the Paasche index $$PPI=\frac{p^1\cdot x^1}{p^0\cdot x^1}$$ How do I show that $PPI\leq CPI$ if preferences are homothetic? Here's what I've done: ...
Ludwig Gershwin's user avatar
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1 answer
89 views

How to calculate direct utility from indirect utility in this exercise?

A consumer has an indirect utility function given by $$v(p_1, p_2, R)=\frac{R}{p_{1}+p_2}$$ Where $p_1$ and $p_2$ denote the prices of the two goods consumed by the individual and $R$ the income. How ...
Arthur Pavezzi's user avatar
1 vote
2 answers
97 views

How to derive the demands from this rather bizarre utility?

I have a rather bizarre utility function, which is neither differentiable nor quasi-concave $$u(x_1,x_2)=\max\{\min\{x_1,2x_2\},\min\{2x_1,x_2\}\}$$ How to derive the demand function?
Ludwig Gershwin's user avatar
1 vote
1 answer
173 views

Does WARP still imply Compensated Law of Demand even if one of the goods is indivisible?

Consider 2 goods, $x_1$ and $x_2$. Let's assume $x_1$ is indivisible (we can only consume integer units of $x_1$). And suppose the consumer satisfies budget balance and homogeneity of degree 0, and ...
Ludwig Gershwin's user avatar
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0 answers
12 views

Conversion rate models for multi-touch digital advertising over time

Is there any literature on the conversion rate of multi-touch advertising over time, showing that how decreasing the time between touches increases conversion rate? For example, a chart showing: Y-...
Jabberwockey's user avatar
0 votes
1 answer
29 views

Proof for calculating market elasticity of demand

I have heard that the market elasticity of demand for a good is the weighted sum of the individual price elasticities of demand for that good but cannot find any information about it online. Could ...
Aryan Arora's user avatar
1 vote
2 answers
102 views

Question About Non-Discriminating Monopolist - Mathematics for Economists by Simon and Blume Chapter 17 Exercise 7

I am working on Mathematics for Economists by Simon and Blume Exercise 17.7. I know there is an Answers Pamphlet. However, the solution to this question does not make any sense to me. It seems that ...
Beerus's user avatar
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0 answers
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Is it possible to get back the consumer’s utility function from their demand functions?

I am curious about if it’s possible to reverse the utility maximization process, i.e. given the consumer’s Marshallian demand functions, find their utility function. I was thinking of trying to find ...
Nicolas Torres's user avatar
2 votes
1 answer
80 views

Is there a simple language explanation for Hick's Reciprocity/Symmetry Theorem?

It is a well known fact in consumer theory that for a Hicksian demand curve the cross-price effect of good i with respect to the price of good j equals the cross-price effect of good j with respect to ...
Istvan's user avatar
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1 vote
2 answers
51 views

Why would lowering quantity supplied cause to quantity demanded to increase?

I am reading an article about price-takers versus price-makers and it says the following: A Price Maker has the ability to alter the output of its product at any time to suit its needs for profit ...
Anthony Fallone's user avatar
1 vote
1 answer
130 views

Finding the profit from a demand equation

The demand equation for a company's product is $3p + x = 400$, where $x(t)$ units can be sold at a price of $p$ each. If the demand increases at a rate of 3 units per year when the demand reaches 50 ...
eraldcoil's user avatar
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2 votes
0 answers
94 views

CES in Slutsky matrix (weird results)

We have a Slutsky matrix: \begin{bmatrix} \partial x_{1}^H/\partial P_1 & \partial x_{1}^H/\partial P_2 & \dots & \partial x_{1}^H/\partial P_n \\ \partial x_{2}^H/\partial P_1 &...
Athaeneus's user avatar
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3 votes
3 answers
350 views

The formula for expansion path

Is there a way how to precisely compute the expansion path? I know a consumer's utility function $U(\boldsymbol{x})$, I know the budget constraint $\sum P_i x_i \leq M$, I am able to compute the ...
Athaeneus's user avatar
  • 796
2 votes
1 answer
65 views

Linear Engel Curve

How to prove that if the Engel curves (expenditures as a function of wealth) are linear in wealth, then the indirect utility function has the form $v_{i}(p,a_{i})=\alpha_{i}(p)+\beta(p)a_{i}$ for an ...
DRM's user avatar
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1 vote
1 answer
49 views

Are other 'variables' in demand functions always fixed?

My question is whether our demand functions e.g. Hicksian (compensated) demand, are ever functions of 3 or more variables, or if the other price variables and utility are always fixed, and hence just ...
CormJack's user avatar
  • 899
2 votes
1 answer
67 views

Integrating over the Y Axis: (∆CS)

The traditional formulae for consumer surplus is: $\text{CS} = \int_{0}^{x_0} [x(p_x,\overline{p_y}, \overline{m})]dx - x_0P_{x_0}$. This is the area under the Marshallian demand curve, that is only ...
CormJack's user avatar
  • 899
1 vote
1 answer
99 views

Calculating the substitution effect with the derivative

Substitution Effect (SE) for a price increase of $P_x$ to $P_x'$ can be written as: $h(P_x', P_y, U) - h(P_x, P_y, U) = ∆h$, where $h$ is Hicksian demand. Correct? The Slutsky equations decomposes a ...
CormJack's user avatar
  • 899
1 vote
2 answers
81 views

Are grains a Giffen good? Also does circumstances make a good - Giffen good?

I was going through microeconomics course and I came across the Giffen good. Now I have a scenario with me. A family only buys grains and chocolate from the shop and the price of grain is increasing. ...
arjun gopan's user avatar
2 votes
1 answer
135 views

Is there a situation when a shift in supply and demand leads to a shortage?

For my intro health economics class, my professor asked us to explain how certain scenarios impact the supply and demand of health care (using only supply/demand analysis). He raised an example of a ...
user43370's user avatar
0 votes
0 answers
103 views

Finding demand function in Walrasian equilibrium

Maybe the title doesn't reflect what I mean perfectly but basically, I wanna derive demand functions from those two utility functions: where $x_{11}$ is the consumption of good 1 by agent 1 and $x_{...
Tatanik501's user avatar
1 vote
0 answers
54 views

Expenditure function only dependent on prices

I'm struggling with a problem where I want to derive the Hicksian demand from a given expenditure function $e(p,u)$. I would do that by using Shephard's Lemma, so that the first partial derivative of $...
papagena's user avatar
3 votes
3 answers
110 views

What exactly is the demand for money?

If the demand for money is the total amount of money that people want, then wouldn’t it just be infinite, considering people want as much money as they can get? I also don’t get why when people’s ...
Anthony Fallone's user avatar
1 vote
1 answer
520 views

Why is the demand function homogenous of degree $0$ in all prices and income?

Why is the demand function homogenous of degree $0$ in all prices and income? If I know that the expenditure function is homogenous of degree $1$ in prices and income, how do I show, using the lemma ...
flower_bloom's user avatar
1 vote
1 answer
62 views

how and why Roy's equation works?

i know that the roy's identity is: ${\displaystyle x_{i}^{m}(p,w)=-{\frac {\frac {\partial v}{\partial p_{i}}}{\frac {\partial v}{\partial w}}}}$ but i can't understand why it works. why the fraction ...
Giovanni's user avatar
2 votes
1 answer
116 views

Complements/substitutes estimation from data (Slutsky matrix)

Estimation of complements/substitutes by Slutsky matrix from observable data Hello everyone, I was curious about the following problem: I can observe price $P_i$ of $n$ goods and the amount of goods $...
Athaeneus's user avatar
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0 votes
1 answer
307 views

Question regarding perfectly elastic demand

I know that perfectly elastic demand looks like a horizontal line on a graph, but this implies that somehow the quantity demanded is multiple values simultaneously at a single price point. How is this ...
Anthony Fallone's user avatar
0 votes
0 answers
40 views

Does the compensated law of demand hold for giffen good?

Considering 2 goods good 1 and good 2 where good 1 is given. Can you show me with a help of a diagram when the price of good 1 aka the giffen good increases?
reindeer's user avatar
1 vote
0 answers
44 views

Contractionary monetary policy to tame inflation. Paradox?

One of the consequences caused by high inflation is lower economic growth. The central bank, by contractionary monetary policy, increases interest rates in order to decrease aggregate demand and lower ...
user42354's user avatar
3 votes
1 answer
101 views

What are the most plausible scenarios for Eurozone economics without Nord Stream 1 gas?

As you may have heard, the Nord Stream 1 and 2 gas pipelines are no longer available. It is possible to foresee the most probable economic outcomes of that events to the Eurozone area? My main focus ...
Vitaly Olegovitch's user avatar
0 votes
2 answers
353 views

Homogeneity of compensated demand for Leontief (perfect complements) function

In my assignment I have a Leontief (perfect complements) function u(x,y)=min(x,2y). Keeping utility fixed, we minimize the expenditure. Since we have a Leontief function, at a fixed level of utility u(...
Ksenia's user avatar
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0 votes
1 answer
289 views

Price Elasticity for a group of products

I am given a list with items and corresponding prices and units sold. Those items can be clustered into product groups. For most of the items, between 2 and 3 different prices can be observed. This ...
Patrick Balada's user avatar
2 votes
0 answers
166 views

Uncompensated and compensated demand functions

I came across this lecture note online and some of the points below confuse me. I have added the part that confuses me as an image and here is the lecture note for further reference, if needed. ...
Isa's user avatar
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2 votes
0 answers
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I need help interpreting a diversion curve diagram (transport economics)

In my handbook of transport economics (Blauwens, De Baere, Van de Voorde, 2020), while discussing infrastructure assignment and the diversion curve method, the following diagram is shown (minus "...
Nasan's user avatar
  • 173
2 votes
1 answer
86 views

If the income increases by $\$d$, will it mean the utility at the optimal point increases by $\lambda d$?

I read that if the income increases by $\\\$d$, then the utility at the optimal point will increase by $\lambda d$. How do I get a sense of this, both mathematically and intuitively? Can we write that ...
cris's user avatar
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0 votes
0 answers
22 views

How Can I Model Demand Elasticity?

Can demand elasticity be determined by examining the distribution of marginal utility across a potential customer base? For example, if the distribution of marginal utility among potential customers ...
Eduardo Culloch's user avatar
3 votes
1 answer
174 views

Does continuous preference imply upper-hemi continuous demand correspondence?

Let alternative $x,y,z\in R^N$. $\succsim$ is convex, rational, monotonic, and continuous. Let $B=[y,z]$ be a budget segment. Let demand correspondence be $D[y,z]=\{x\in B||x\succsim B\}$ $D[y,z]$ is ...
High GPA's user avatar
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