Werner Hildenbrand

On the "Law of Demand."

Demand, Supply and the Market ______________________________________ Learning Outcomes Upon completion of this chapter, you will be able to: 1. Explain the law of demand: how the price of a good affects the quantity demanded 2. Identify what other factors affect demand (the non-price determinants of demand) 3. Explain the law of supply: how the price of a good affects the quantity supplied 4. Identify other factors that affect supply (the non-price determinants of supply) 5. Show how to derive the demand and supply curves from demand and supply tables 6. Demonstrate how supply and demand interact to determine equilibrium price and quantity of goods 7. Explain situations of market disequilibria and show how the market reaches new equilibrium 8. Show how Government interventions in the market (such as price supports or price ceilings) affect the operations of markets.

Core of an economy

Publisher Summary The core of an economy consists of those states of the economy that no group of agents can improve upon. A group of agents can improve upon a state of the economy if the group, by using the means available to it, can make each member of that group better off, regardless of the actions of the agents outside that group. This chapter explains that the core of an economy might be empty. But if an allocation in the core exists at all, there are, in general, many such allocations. The core is a rather theoretical equilibrium concept. It is used to provide a theoretical foundation of a more operational equilibrium concept—the competitive equilibrium—which, in fact, is a very different notion of equilibrium. The allocation process is organized through markets; there is a price for every commodity. All economic agents take the price system as given and make their decisions independent of each other. The equilibrium price system coordinates these independent decisions in such a way that all markets are simultaneously balanced. A state of the economy that is decentralized by an equilibrium price system cannot be improved upon by cooperation. This proposition strengthens the well-known proposition of welfare economics to the case where ownership in initial endowments is not collective but individual. For economies with a finite number of participants, the influence of every agent is not strictly negligible, and the core is larger than the set of competitive equilibria.

Stochastic processes of temporary equilibria

Abstract It is the aim of the paper to study within the framework of an ‘overlapping generation model’ the evolution of temporary equilibria. At date t , there are ‘newborn’ agents and ‘old’ agents who were born in previous periods; the old agents hold cash balances (fiat money) that they carried over from the previous period. At the beginning of period t , all agents receive a random endowment of consumption goods. Then the agents exchange these endowments and money on spot markets at date t (trading in future markets is not considered). Once a temporary equilibrium is reached, the economy move to the next date. Agents who were born at date t then become old and meet agents born at period t +1. It is shown that the evolution of temporary equilibria in this model leads to analyse the ergodic properties of a certain class of Markov processes with stationary transition probability.

Facts and ideas in microeconomic theory

The title of my lecture is quite pretentious. Therefore, let me first restrict the subject somewhat. I will not speak on Microeconomics in general, but on Demand Theory in particular. The less pretentious title ‘Facts and Ideas in Demand Theory’ would be a fairer description of the content of my lecture. If it comes to Demand Theory I enjoy reading in Hicks’ A Reoision of Demand Theory. I read this book in parts again and again. Let me quote now a few lines on p. 4.

The Demand theory of the Weak axioms of Revealed Preference

Abstract Simple proofs are given for theorems that relate revealed preference axioms for demand and excess demand functions to restrictions on the Jacobian and Slutsky matrices.

Family expenditure data, heteroscedasticity and the Law of Demand

Abstract This paper presents some results of a data analysis of Family Expenditure Surveys for the United Kingdom and France. It is shown that these data sets exhibit characteristic features that we call “increasing spread” and “increasing dispersion”. Statistical tools used for analysing the data are discussed. They are based on concepts from non-parametric regression and average derivative estimation. One can show that increasing dispersion supports the weak axiom of revealed preferences of the market demand function. Increasing spread provides empirical evidence for the Law of Demand.

Aggregate behavior and microdata

It is shown how one can effectively use microdata in modelling the change over time in an aggregate (e.g. mean consumption expenditure) of a large and heterogeneous population. The starting point of our aggregation analysis is a specification of explanatory variables on the micro-level. Typically, some of these explanatory variables are observable and others are unobservable. Based on certain hypotheses on the evolution over time of the joint distributions across the population of these explanatory variables we derive a decomposition of the change in the aggregate which allows a partial analysis: to isolate and to quantify the effect of a change in the observable explanatory variables. This analysis does not require an explicit treatment of the unobservable variables.

Demand aggregation under structural stability

The goal of this paper is to model the mean (aggregate) consumption expenditure of a large and heterogeneous population of households. The aggregation process is based on assumptions of how the income distribution and the composition of the population evolves over time (structural stability). It is shown that the change in the aggregate consumption expenditure ratio can be decomposed into an effect of changing income dispersion, an effect of income growth, an effect of price inflation and an effect of changing composition of the population.

An exposition of Wald’s existence proof

In the 74. Kolloquium of 19.3.1934 and in the 80. Kolloquium of 6.11.1934, both with the same title “Uber die Produktionsgleichung der okonomischen Wertlehre ” Wald analysed the solvability of the following system of equations: