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The Demand Set <Back to Last Page>     <Full Glossary>

Definition of The Demand Set: In a model, the set of the most-preferred bundles of goods an agent can afford. This 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 >p as a weak preference relation over goods; that is, x>px' 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(>p,p,e) denote the demand set. Then:
D(>p,p,e) = {x: px <= pe and x >p x' for all affordable bundles x'}. (Econterms)

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