# Questions tagged [demand]

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### Price-consumption curve

Suppose a consumer whose income is $b$ has a utility function given by $U(x,y) = 2xy+y^2$ with the price of $x$ being $p_x$ and the price of $y$ being $p_y$. Draw the price-consumption curve assuming ...
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### Effect of price on utility

A consumer has an endowment vector $w$; at prices $p$ his demand for the first good exceeds his endowment; $x_1^+(p; pw)>w_1$ then a small increase of $p_1$ will lower his utility. I was discussing ...
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### Finding restrictions on parameters for a demand function

I have a question that asks: Let $x_1$ be the quantity of a good 1, $p_1$ the price of good 1, $p_2$ the price of good 2, and $M$ is income. Let $𝑥_1(𝑝_1, 𝑝_2, 𝑀; 𝐴) = 𝐴𝑝_1^𝛼𝑝_2^𝛽𝑀^𝛾$ ...
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### what is monotonicity and strict monotonicity in preferences?

I am really confused between monotonic preferences and strictly monotonic preferences, I saw some video and read certain answer where it is mentioned that the When preferences are monotone / weak ...
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### Approaches in demand analysis

What is the difference between Engel Curve and the system approach of demand analysis?
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### CES utility function in an Edgeworth box

Two consumers have the CES utility function $x_1^\beta +x_2^\beta$, for $0<\beta<1$, their initial endowments are $w^1=(1,0)$, $w^2=(0,1)$ Draw the Core of this economy in an Edgeworth box. Note ...
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### How to explain negative correlation between quantity sold and expenditure on advertisement?

I have received the following dataset from our economics Professor. It has 15 observations and 4 variables - 'qsold' (quantity sold of product X), psn (price of X), ...
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### Interpreting the q-intercept of the demand curve

Given a demand curve for a particular commodity, which I'll interpret as a function $p(q)$, the $p$-intercept can be interpreted as the choke price, i.e. the lowest price at which quantity demanded is ...
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### When the global optimal is outside of the constraint set, what will be the demand?

$u:\mathbb R^n\to\mathbb R$ is a quasi-concave utility function so the indifference curves are convex. $a,b\in\mathbb R^n$ are two points. Our budget set is the (one-dimensional) segment $[a,b]$ that ...
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### Is saying that the demand is elastic or inelastic too oversimplified?

As we know that elasticity varies from infinity to zero as we move along a linear demand curve, then is it correct to label any demand curve elastic or inelastic as a whole?
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### Why can't I find masks for the corona virus?

Not an economist by far, just a layman, and that's a layman question. How is this possible that it's difficult to find mask for the Corona Virus? I have been several times to 7/11, boots, Watson, and ...
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### Finding demand functions for an unusual utility function

I have a utility function: $U = x + \min\{x,y\}$ I want to draw the indifference curve and find the demand functions. Will it be the case of the usual perfect complements? Also, what preferences ...
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### Prove the equation

Let $$x^0=x^*(p^0,w)$$ then $$v(p,px^0)$$ is minimized at $$p=p^0$$ What theorem are we supposed to use in order to solve this, because I am a bit lost. Thanks in advance for all the suggestions/help....
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### Walrasian demand with a twist of Leontief function

A consumer has the utility function $u(x_1; x_2) = \min(x_1; x_2) + 5 \max(x_1; x_2)$. Find its Walrasian demand $x^*(p; w)$. I've tried searching it up when we have two Leontief functions summed ...
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### Examples of bounded, positive, inverse demand curves

The three most common examples of demand curves I am aware of are \begin{align} Q&= b - aP,\\ Q&= bP^a,\\ Q&= b e^{-aP}\\ \end{align} The first being our classic linear demand curve, the ...
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### What additional axiom to GARP do we need to generate a differentiable or smooth utility function

After researching for a while, I find this: https://www.jstor.org/stable/1913607?seq=2#metadata_info_tab_contents They come up with an axiom called SSARP that generates a preference with smooth demand ...
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### Marshall demand for simple CES utility

Assume that preferences are given by a utility function is given $$u(x_1,x_2) = (x_1^\rho + x_2^\rho)^{1/\rho}$$ what then are the Marshall demand given budget constraint $$p_1x_1 + p_2x_2 \leq I$$
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### Budget Set- closed and boundedness

I am fairly new to economics, and we were introduced to budget sets, The professor mentioned that the budget set $B(p,w) = \{x \in R^{l}_{+}: px \leq w\}$ is non empty and closed - I could prove the ...
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### confusion regarding elasticity of a demand curve

The following question is on a quiz at Marginal Revolution University: https://mru.org/practice-questions/calculating-elasticity-demand-practice-questions The elasticity of demand is 2.0. Is the ...
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Given a quasi-linear utility function: $u(x_1, x_2) = f(x_1) + \beta x_2$, $\beta > 0$ What would happen if good 2 ($x_2$) is removed from the market? Would the new utility function be: $u(x_1) =... 2answers 2k views ### Difference between Engel curve and income expansion path I was scrolling through many questions on this site about income offer path and it appeared to me that income offer path, income expansion path, engel curve all are different terms with same meaning, ... 1answer 51 views ### Homework Question - Price Floor / Elasticity of Demand I'm currently taking undergrad microeconomics and came across the following question: The current price floor in the agricultural lettuce market makes it such that price of lettuce is 25% higher than ... 1answer 56 views ### Essential goods: How does one restrict the utility function? I understand that solutions on boundary of the set under consideration when doing constrained optimization are often problematical. Usually it is said that we assume that goods are essential to insure ... 1answer 71 views ### Would Pilots and Air travel be considered complementary? Now, my economics teacher and I have a disagreement. According to theory, as the price of air travel (airline tickets) increases, the demand for pilots will decrease as well because fewer people will ... 1answer 104 views ### Max Utility Function and Finding associated demand curve I have a max utility function, therefore; U(x,y)= max(2x,y) and I am trying to find the demand function x = x(𝑝x , 𝑝y , 𝑀), note this function cannot be differentiated. I am familiar that the ... 1answer 198 views ### How do I derive the aggregate demand function given two utilities functions? Assume that we have two people with the same utility function of$U_i = x^{1/2} + y^{1/2}$where$i=1,2$and$I_i$is the income. Let$P_x$denote price of good$x$and$P_y$denote price of good$y$. ... 1answer 317 views ### Reason behind the decomposition of price effect into substitution and income effects I was studying the decomposition of price effect into substitution and income effects. I am finding it a bit complicated. This is what I have understood: (0) Let us assume that there are two ... 3answers 55 views ### Does investment directly influence demand? I quote from the first page of India's Economic Survey 2019 (an official document) - Investment, especially private investment, is the “key driver” that drives demand, creates capacity, ... 0answers 29 views ### Definition of strictly convex preference Let$x,y\in X$. Does strictly convex preference (which implies that the utility is strictly quasiconcave) mean that:$x\succsim y$implies$\alpha x+(1-\alpha)y\succ y$for any$\alpha\in (0,1)$? 0answers 21 views ### functional form for a consumption shock In a DSGE model, how can I add a disturbance/shock in the consumption of households? For example given my utility function $$U(C,H) = \frac{C_t^{1-\theta}}{1-\theta} - \frac{B}{\eta} H_t^\eta,$$ ... 1answer 91 views ### GDP in equilibrium I have to find the GDP in equilibrium for a IS LM model. It is given that$M^d (Y,r)=M_0+M_1Y-M_2r$and$M^d=M/P$,$M_0,M_1,M_2>0$and$M^d$is money demand. my solution so far I have found that$...
Given the demand function, $$D(p)=A-ap$$ I've found the optimal price, $$p=\frac{A+ac}{2a}$$ Where $c$ is cost and $A,a >0$. My question is how is the optimal price is dependent of $a$ (1) - what ...
I have the utility function: $U(x_1,...,x_n)=a_0+\sum_{i=1}^{n}a_ix_i\;\;\;\;\;\;\;\;\;a_j\in\mathbb{R}_+ \;\;\forall j=\{0,...,n\}$ (maybe $a_0$ could be zero) $\sum_{i=1}^{n}a_i\in (0,K)\;\;\;$ ...