The Monotonicity of Individual and Market Demand
Article first published online: 10 DEC 2003
Econometric Society 2000
Volume 68, Issue 4, pages 911–930, July 2000
How to Cite
Quah, J. K.-H. (2000), The Monotonicity of Individual and Market Demand. Econometrica, 68: 911–930. doi: 10.1111/1468-0262.00141
- Issue published online: 10 DEC 2003
- Article first published online: 10 DEC 2003
- Law of demand;
- monotonic function;
- substitution effect;
- indirect utility;
- marginal utility of income;
- income distribution.
This paper studies the monotonicity of individual and market demand with the aid of the indirect utility function. We identify sufficient (and in a sense, necessary) conditions on an agent's indirect utility which will guarantee that he has a monotonic demand function. Our conditions also point to a natural way of extending the result of Hildenbrand (1983). Hildenbrand showed that market demand is monontonic if the income distribution has a downward sloping density, even though individual agents' demand function might violate monotonicity. Using the indirect utility function, we introduce a measure of violations of individual monotonicity that allows us to identify a larger class of density functions that will generate a monotonic market demand.