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Pastimes : Austrian Economics, a lens on everyday reality -- Ignore unavailable to you. Want to Upgrade?

To: Don Lloyd who wrote (99)	12/23/2001 2:15:37 AM
From: Don Lloyd	Respond to of 445

An even simpler example that can be fully enumerated -- An economy consists of a single individual and two economic goods, apples and oranges. All possible combinations of 0,1 or 2 apples and oranges are subjectively ranked from 1 to 9. The total costs for each combination are calculated for market prices of $1.01 for apples and $1.00 for oranges. Then the market price of oranges is reduced to $0.99 and the total costs are re-calculated. For every possible income, the changes in demand due to this price decrease in oranges are summarized. Total Cost @ Total Cost @ Subj Qty Qty Apples = $1.01 Apples = $1.01 Rank Apples Oranges Oranges = $1.00 Oranges = $0.99 ---- ------ ------- --------------- --------------- 1 2 2 $4.02 $4.00 2 2 1 $3.02 $3.01 3 1 2 $3.01 $2.99 4 2 0 $2.02 $2.02 5 1 1 $2.01 $2.00 6 0 2 $2.00 $1.98 7 1 0 $1.01 $1.01 8 0 1 $1.00 $0.99 9 0 0 $0.00 $0.00 Income Range Demand Changes for Orange $0.99 Rank/Changes ------------ ------------------------------- ------------ $0.00-$0.98 none 9 $0.99 Oranges 0 to 1 9 to 8 $1.00 none 8 $1.01-$1.97 none 7 $1.98-$1.99 Apples 1 to 0, Oranges 0 to 2 7 to 6 $2.00 Apples 0 to 1, Oranges 2 to 1 6 to 5 * $2.01 none 5 $2.02-2.98 none 4 $2.99-$3.00 Apples 2 to 1, Oranges 0 to 2 4 to 3 $3.01 Apples 1 to 2, Oranges 2 to 1 3 to 2 * $3.02-$3.99 none 2 $4.00-$4.01 Oranges 1 to 2 2 to 1 $4.02 plus none 1 The Law of Demand states that if the price of a good is decreased, keeping everything else the same, its unit demand will increase. In this example, most often the demand does not change, and for the *-marked lines, the demand for oranges actually decreases as the market price for oranges decreases. I suspect that the missing ingredient is a requirement that the goods involved be infinitely divisible. Question - Can a reference be found that addresses this issue? TIA, Don