The Representation of Consumers’ Preferences and Market Demand

Stephen DeCanio ()

Chapter 2 in Economic Models of Climate Change, 2003, pp 16-57 from Palgrave Macmillan

Abstract: Abstract The general equilibrium models used for climate policy analysis are stylized representations of the activities of the millions of individuals and organizations that constitute the economy. The models themselves are made up of systems of equations that represent production and consumer demand, and spell out the market conditions that determine the prices and quantities of goods bought and sold. In some cases, key features of the models are determined outside the interactions they describe, or “exogenously.” For example, technological progress (which can be measured as the increase in output that can be obtained from given inputs as time goes on) is often specified as a constant percentage rate of change independent of other variables in the model. Technical progress can also take the form of entirely new products or services. The conditions of general equilibrium determine how the structural and behavioral equations are to be solved to yield the prices and quantities that emerge within the economy. The meaning of “general equilibrium” is that all markets clear in the sense that the plans and intentions of consumers and producers are fulfilled.

Keywords: Utility Function; Demand Function; Excess Demand; Multiple Equilibrium; General Equilibrium Model (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-50946-7_2

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DOI: 10.1057/9780230509467_2

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