The Monotonicity of Individual and Market Demand
Econometrica · 2000 · Volume 68 · Issue 4
Abstract
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.
Keywords
Law of demand, monotonic function, substitution effect, indirect utility, marginal utility of income, income distribution.
Enable JavaScript for citation tools and additional paper interactions.