Econometrica: May, 1995, Volume 63, Issue 3

Distribution of Income and Aggregation of Demand

https://doi.org/0012-9682(199505)63:3<647:DOIAAO>2.0.CO;2-2
p. 647-666

F. Marhuenda

We show that, under certain regularity conditions, if the distribution of income is price independent and satisfies a condition on the shape of its graph, then total market demand, $F(p)$, is monotone; i.e., given two positive prices, $p$ and $q$, one has $(p - q). (F(p) - F(q)) < 0$. These results allow for density functions increasing on some intervals, like unimodal distributions or even densities with more than one peak. Similar assumptions on the distribution of endowments, yield a restricted monotonicity property on aggregate excess demand, where, now, wealth is determined by market prices. This property guarantees uniqueness and stability of equilibrium of the Walrasian pure exchange economy.