Questions tagged [demand]

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making a utility model for CO2 compensating travel demand

I'm trying to make a model which is build around the idea of carbon offsetting fuel (the consumer pays an extra fee per litre fuel for the compensation of the emitted CO2). The goal here is to make a ...
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1answer
172 views

Marshalian and Hickisian Demands and Slutsky Equation

everyone. I have the following question: A consumer has the following indirect utility function: $ V(p_1,p_2,b) = (p_2k-b)p_1^{-1} \left[ \frac{2p_2k - 2b}{p_2} \right]^{-2}, x_2 < k$ a) Find ...
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1answer
49 views

Can the demand curve be a rectangular hyperbola, but $E_D \neq 1$? [closed]

So, I am given the next table: I am asked to find $Q_D$. So the prerequisites to find $Q_D$ is that the price must change, and all other factors of demand must be steady. So, I can find the $Q_D$ ...
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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 ...
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1answer
345 views

Deriving a demand curve from a Cobb-Douglas utility

Probably a daft question but I derived an equation for a demand curve from a general Cobb-Douglas utility function $$U(x,y)=\beta x^{\alpha}y^{1-\alpha}$$ given a budget constraint $$M=xP_x+yP_y$$ and ...
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1answer
26 views

Unit Elasticity Calculation Question

I'm struggling with a math concept dealing with unit elasticity at an undergraduate textbook level. In most problems, we are given a starting price and an ending price as well as corresponding ...
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3answers
721 views

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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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 $y$. ...
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2answers
75 views

Derivation of a Demand Equation

A consumer's utility function is $U(x,y)=\sqrt x + y$. Assuming we have an interior solution, I need to show that the demand for $x$ does not depend on income. I know that the consumer consumes where ...
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1answer
97 views

Effects of increased income over short and long run in AD-AS equilibrium model

I've read in a few places that increased income/wages shifts SRAS to the left, which makes sense because firms' costs are increasing to pay for them. My textbook says that there's no effect on ...
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45 views

On Demand Functions and Engel Curves

A consumer has utility function $U(x,y)=(x−2)y$, where $x≥2$ and $y≥0$. The price of $x$ is $P_x$, the price of $y$ is $P_y$ and the consumer's income is $I>2P_x$. ($x$ and $y$ do not have to be ...
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1answer
58 views

why is aggregate demand equal to aggregate expenditure?

AD is how much the people in market demand (or want to buy) goods and services. On the other hand, AE is actually how much they end up spending. AD = AE = C+I+G+X-M I can demand and not buy? wouldn'...
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2answers
482 views

Why isn't “long-run aggregate demand (or LRAD)” a thing?

To give you a sense of where I am in my understanding of economics, I've just learned about long-run aggregate supply in the neoclassical/monetarist view as a vertical curve. It occurred to me why ...
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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 ...
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0answers
211 views

Determine if goods are substitutes or Complements based on demand function

So I have a consumer with a utility function of the Cobb-Douglas form $v(x_1,x_2)=x^{\frac{1}{2}}_1x^{\frac{1}{2}}_2$. From that I constructed the demand function for good 1 and good 2: $x_1=\frac{1}{...
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1answer
68 views

Question about the relationship between Weak Axiom and Slutsky Matrix

We know that if a differentiable Walrasian demand function $x(p,w)$ satisfies Walras' law ($p^Tx=w$), homogeneity of degree zero ($x(\alpha p,\alpha w)=x(p,w)$), and the weak axiom of revealed ...
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1answer
38 views

How can I prove $∇U(x).D_m x(p,m)= \text{shadow price}$?

Why inner multiplication of the gradient of utility function in derivative of demand function with respect to income is equal to shadow price? This is the equation which is given but I don't know ...
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2answers
422 views

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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1answer
199 views

Why income elasticity of demand of luxury good in greater than 1?

According to textbook and wikipedia, "if income elasticity of demand of a commodity is less than 1, it is a necessity good. If the elasticity of demand is greater than 1, it is a luxury good or a ...
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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, ...
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17 views

How does investment lead to generation of jobs?

I quote from India's Economic Survey 2019 (an official document) - While the claim is often made that investment displaces jobs, this remains true only when viewed within the silo of a specific ...
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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, ...
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1answer
80 views

Effect of a change in quality on price elasticity of demand

I am interested to know how one would expect a change in the quality of a product to affect its price elasticity of demand. Two example will illustrate my confusion: Example 1 Suppose a producer is ...
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1answer
48 views

Aggregated demand of households given utility function

I have an utility function given, $\ u_j(q_{j1},q_{j2} )=q^{3/4}_{1j}*q^{1/4}_{2j} $ $\ s.t.: y=p_1*q_{1i} +p_2*q_{2i}$ I do know that the for $\ q_{1j}$ the marginal prospensity to consume is 3/...
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333 views

Intermediate demand vs. Intermediate consumption

I am trying to understand what's the difference between intermediate consumption and intermediate demand. The context is the European System of Accounts, which says that intermediate demand is the ...
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82 views

Afriat theorem for negative goods

GARP and Afrait theorem assume that the alternative $x\in\mathbb R_+$ is always positive. In some economic contexts, such as financial choices, the attribute can be negative. I wonder if we can ...
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95 views

Can there be a good which has both Hicksian and Marshallian demand curves vertical?

Consider a perfectly inelastic (Marshallian) demand curve for a good X. Does this good also have a vertical Hicksian demand curve?
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1k views

Demand derived from Cobb-Douglas utility, interpretation, check

I derived demand, given a Cobb-Douglas utility function but I am not really sure if I did it correctly. I am especially struggling with the sum signs and the subscripts of $i$ & $j$. It would be ...
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133 views

Econ Intuition for Jacobian inverse in demand system

Consider the following simple linear demand system (in vector notation) with n different products Demand: $\quad\mathbf{q=B\left(a-p\right)}$ Inverse demand: $\quad\mathbf{p=a-B^{-1}q}$ where $\...

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