Monday, September 18, 2017

A couple of animations: demand curves

In my book, I illustrated Gary Becker's random agent model using a text diagram:


Here is an animation of that random agent model tracing out a demand curve when you change the price:


In the graph on the left, the black dot represents the average, and the black line represents the budget constraint. The graph on the right represents the demand curve traced out as we increase the price. A key thing to remember is that in order to achieve this result, we have to explore the full state space (the triangle under the black line). If we don't, then raising the price (or cutting it) doesn't necessarily change the quantity demanded:


2 comments:

  1. what aree the implications of beckers finding for the SMD theorem?

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    1. I'm not sure I understand the question. The SMD theorem is about the aggregation of rational agents' excess demand functions, so would be silent on the aggregation of "irrational agents".

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