Demand set explained

A demand set is a model of the most-preferred bundle of goods an agent can afford. The set is a function of the preference relation for this agent, the prices of goods, and the agent's endowment.

Assuming the agent cannot have a negative quantity of any good, the demand set can be characterized this way:

Define

L as the number of goods the agent might receive an allocation of. An allocation to the agent is an element of the space R ^{L} _{+} ; that is, the space of nonnegative real vectors of dimension L .

Define

\succeq _{p} as a weak preference relation over goods; that is, x \succeq _{p} x' states that the allocation vector x is weakly preferred to x' .

Let

e be a vector representing the quantities of the agent's endowment of each possible good, and p be a vector of prices for those goods. Let D(\succeq _{p,p,e)} denote the demand set. Then: D(\succeq _{p,p,e)} : = \{x: p _{x} \leq p _{e} ~~~and~~~ p _{x'} \leq p _{e} \implies x'\preceq _{p} x \} .

See also

• Demand
• Economics

External links

• http://economics.about.com/library/glossary/bldef-demand-set.htm?terms=Demand+Set