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Household Expenditure Read chapter Read first chapter

2014 | OriginalPaper | Chapter

4. Market Equilibrium Model

Author : Shapoor Vali

Published in: Principles of Mathematical Economics

Publisher: Atlantis Press

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Abstract

A household’s demand for a good or service expresses the quantities of that good or service that the household is willing and able to purchase as a function of a number of variables.

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previous chapter Sets and Functions
next chapter Rates of Change and the Derivative
Footnotes
1
In the next section we will discuss restrictions on parameters of both supply and demand function.
 
2
Expressing the household’s income annually immediately establishes the fact that quantity demanded is for one year period.
 
3
L.R. Klein, “Macroeconomics and the Theory of Rational Behavior”, Econometrica, 14, 1946a. L.R. Klein, “Remarks on the Theory of Aggregation” Econometrica, 14, 1946b. H. Theil, Linear Aggregation of Economic Relations, North-Holland, Amsterdam, 1954.
 
4
This is another nice trick to get rid of the aggregation problem altogether. The downside is, of course, an I-robot society!
 
5
Taken from Ramu Ramanathan Introductory Econometrics with Application, 1992, second edition, the Dryden Press.
 
6
In addition, for market equilibrium to be socially optimal, there should be no externalities.
 
7
Paul Krugman, The Return of Depression Economics and the Crisis of 2008, p. 18.
 
8
James Doti and Esmael Adibi, Econometric Analysis: An Applications Approach, Prentice-Hall 1988.
 
9
As an analog of a household consumption function, \(C_0\) is sometimes interpreted as the subsistence level of consumption.
 
10
Some writers express (4.22) as \(C = a\,{+}\,b Y\) and treat the autonomous consumption as a parameter. Given the volatility of autonomous consumption, due to wealth and other non-income effects, it should not be considered a parameter. After all, based on the definition, a parameter changes very slowly and incrementally.
 
11
From Ramu Ramanathan Introductory Econometrics with Application pp. 544–547.
 
Metadata
Title
Market Equilibrium Model
Author
Shapoor Vali
Copyright Year
2014
Publisher
Atlantis Press
Book
Principles of Mathematical Economics

Print ISBN: 978-94-6239-035-5

Electronic ISBN: 978-94-6239-036-2

Copyright Year: 2014

DOI
https://doi.org/10.2991/978-94-6239-036-2_4