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Aggregate Demand Theory

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Abstract

Aggregate demand theory investigates the properties of market demand functions. These functions are obtained by summing the preference maximizing actions of individual agents. The study of aggregate demand theory is primarily motivated by the fact that market demand functions, rather than individual demand functions, are the data of economic analysis. In general, market demand functions do not inherit the structure which is imposed on individual demand functions by the utility hypothesis. Such structure, when present, enables us to obtain stronger predictions from available data.

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© 2008 Palgrave Macmillan, a division of Macmillan Publishers Limited

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Sonnenschein, H. (2008). Aggregate Demand Theory. In: Durlauf, S.N., Blume, L.E. (eds) The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-58802-2_17

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