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The concept of an excess demand function is important in general equilibrium theories, because it acts as a signal for the market to adjust prices. The assumption is that the rate of change of the price of a commodity will be proportional to the value of the excess demand function for that commodity,
94:
implies that, for every price vector, the price–weighted total excess demand is 0, whether or not the economy is in general equilibrium. This implies that if there is excess demand for one commodity, there must be excess supply for another commodity.
84:(positive excess supply) of the product, and not all of it being offered to the marketplace is being sold. If the price is lower than the equilibrium price, excess demand will normally be positive, meaning that there is a
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is the speed-of-adjustment parameter that can take on any positive finite value (as it goes to infinity we approach the instantaneous-adjustment case). This dynamic equation is
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is the positive speed-of-adjustment parameter which is strictly less than 1 unless adjustment is assumed to take place fully in a single time period, in which case
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is negative—that is, if a rise (or, fall) in the price decreases (or, increases) the extent of excess demand, as would normally be the case.
35:
is a function expressing excess demand for a product—the excess of quantity demanded over quantity supplied—in terms of the product's
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is the negative of the excess demand function—it is the product's supply function minus its demand function. In most cases the
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80:. If the price is higher than the equilibrium price, excess demand will normally be negative, meaning that there is a
62:
of excess demand with respect to price is negative, meaning that a higher price leads to lower excess demand.
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The
Sonnenschein–Mantel–Debreu theorem is an important result concerning excess demand functions, proved by
811:(1973). "Do Walras' identity and continuity characterize the class of community excess-demand functions?".
494:
73:, meaning that the quantity supplied equals the quantity demanded. In this situation it is said that the
51:, the excess demand is the sum of all agents' demands minus the sum of all agents' initial endowments.
380:
24:, is a phenomenon where the demand for goods and services exceeds that which the firms can produce.
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if it is such that the value of the excess demand function is zero: that is, when the market is in
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eventually leading to an equilibrium state in which excess demand for all commodities is zero. If
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643:"Still dead after all these years: interpreting the failure of general equilibrium theory"
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516:. This implies that market processes will not necessarily reach a unique and stable
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in the 1970s. It states that the excess demand curve for a market populated with
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17:
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Mantel, Rolf (1974). "On the characterization of aggregate excess-demand".
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point, because the excess demand curve need not be downward-sloping.
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is the discrete-time analog of the continuous time expression
36:
742:"The Sonnenschein-Mantel-Debreu Results after Thirty Years"
617:
581:
569:
321:{\displaystyle P_{t+1}=P_{t}+\delta \cdot f(P_{t},...)}
178:{\displaystyle {\frac {dP}{dt}}=\lambda \cdot f(P,...)}
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is assumed, the adjustment process is expressed as a
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and possibly other determinants. It is the product's
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677:Debreu, GĂ©rard (1974). "Excess-demand functions".
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704:. Northampton, MA: Edward Elgar Publishing, Inc.
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65:The price of the product is said to be the
771:(1972). "Market excess-demand functions".
701:Post-Keynesian Economics: New Foundations
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235:, then the dynamics are described by a
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512:of degree zero, and in accord with
196:is the excess demand function, and
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470:Sonnenschein–Mantel–Debreu theorem
464:Sonnenschein–Mantel–Debreu theorem
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14:
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679:Journal of Mathematical Economics
407:{\displaystyle {\frac {dP}{dt}}}
650:Journal of Economic Methodology
633:
20:, excess demand, also known as
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1:
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370:{\displaystyle P_{t+1}-P_{t}}
231:If the market is analyzed in
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749:History of Political Economy
740:Rizvi, S. Abu Turab (2006).
733:10.1016/0022-0531(74)90100-8
691:10.1016/0304-4068(74)90032-9
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220:provided the derivative of
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813:Journal of Economic Theory
721:Journal of Economic Theory
500:can take the shape of any
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761:10.1215/00182702-2005-024
662:10.1080/13501780210137083
453:{\displaystyle \delta =1}
641:Ackerman, Frank (2002).
209:{\displaystyle \lambda }
427:{\displaystyle \delta }
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56:excess supply function
33:excess demand function
698:Lavoie, Marc (2014).
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110:differential equation
491:Hugo F. Sonnenschein
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237:difference equation
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495:utility-maximizing
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711:978-1-84720-483-7
588:Sonnenschein 1973
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67:equilibrium price
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106:continuous time
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99:Market dynamics
45:supply function
41:demand function
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5:
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819:(4): 345–354.
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779:(3): 549–563.
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656:(2): 119–139.
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29:microeconomics
18:microeconomics
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773:Econometrica
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514:Walras's law
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414:, and where
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54:A product's
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47:. In a pure
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755:: 228–245.
600:Mantel 1974
564:Lavoie 2014
540:Debreu 1974
518:equilibrium
510:homogeneous
483: [
480:Rolf Mantel
92:Walras' law
71:equilibrium
612:Rizvi 2006
552:Rizvi 2006
524:References
506:continuous
43:minus its
685:: 15–21.
670:154640384
442:δ
422:δ
355:−
285:⋅
282:δ
204:λ
149:⋅
146:λ
837:Category
801:55002985
504:that is
502:function
239:such as
112:such as
86:shortage
22:shortage
793:1913184
82:surplus
75:market
843:Demand
799:
791:
708:
668:
489:, and
331:where
218:stable
188:where
77:clears
797:S2CID
789:JSTOR
745:(PDF)
666:S2CID
646:(PDF)
487:]
37:price
31:, an
706:ISBN
821:doi
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