The market demand model and aggregate demand

Summary

The market demand model

• A single point in time
• Many goods, infinitely divisible
• Fixed prices
• Many individuals with different income and different preferences (well-behaved total order)
• \(x_i^l\) : individual \(i\) ’s demand for good \(l\) ( \(x_i^l≥0\) )
• \(x_i^l\) depends on prices and the income of this individual

Market demand

\[X^l=\sum_{i=1}^{n}{ x_i^l }\]

• \(X^l\) is called the market demand function or the aggregate demand for good \(l\) .
• \(X^l\) depends on all prices and all income.