Demand Ting

8/3/2019 Demand Ting

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Definition of Demand and Demand Axiom criticism on the demand definition of mainstream

economics

Abstract:

This paper researches the consumers behaviour theory and the demand definition of mainstreameconomics and finds that these definitions are different and in contradiction. Therefore, this

paper proposes the Giffen criteria of demand definition. Under this criterion, the demand

definitions of consumers behaviour theory and mainstream teaching materials are all wrong.This paper redefines the demand and analyses the difference between the demand definition of

this paper and that of consumers behaviour theory and mainstream economics. Under the

demand definition of this paper, demand law has become an axiom. The demand curve of Giffen

goods also slides lower right.

Key Words:

Demand theory, law of demand, consumer behaviour, Giffen goods

1. What is demand

Demand is one of the most basic concepts in economics. In a certain sense, economics is asubject researching supply and demand. Strict scientific research requires every concept shall

have a clear definition. Regretfully, in mainstream literature and teaching materials, there is no

unified definition for demand and some are even in contradiction. The confusion of demand

definitions leads to the confusion of the understandings and proofs of demand law.

The solely demand definition that all mainstream economists accept may be the definition of

consumers behaviour theory for demand and it also admits its proving for demand law. Oneexemption is Mr Zhang Wuchang. In his works of Talk about Demand Scientifically [1],

although he accepts this theory, he holds that demand law is an axiom and there is no necessityto prove it from the concept of utility. Regretfully, Mr Wuchangs definition of demand is wrongbasically and he ignores and totally denies the Giffen goods which violate the demand law.

Part constraint conditions in consumers behaviour theory are:1. The prices of other commodities do not change;

2. the absolute disposable individual income does not change

3. Currency has no utility

4. All disposable incomes of consumer are used in one consumption behaviour;5. Only research normal commodity.

Superficially, the consumers behaviour theory only requires part budget of all disposableincomes to be used in one consumption, which means that consumer still has disposable income

after this consumption. This is in contradiction with the constraint condition 3. Therefore, the

disposable income in consumers behaviour theory can only be the whole disposable individualincome.

It is noticed that the one consumption behaviour can only be one practical consumption.

Consumers behaviour theory actually defines both the consumption amount that consumer


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wants to and be able to buy, but would never buy and the real consumption amount as the

demand. This constitutes two definitions of demand. The demand that consumer wants to and be

able to buy but would never buy refers to the consumption amount before the normal commodityreduces price according to the consumers behaviour theory. When the real consumption

behaviour happens, the price of normal commodity has been reduced and the disposable income

will transform to a group of commodities in this behaviour, so the demand that consumer wantsand be able to buy before the normal commodity reduces price would never happen. If the price

of this commodity recover to the level before price reducing and consumer has new disposable

income, the demand that consumer wants and be able to buy, but fail to buy, would probablybecome a real consumption amount. But this has changed the fourth constraint condition. For the

two definitions of demand in consumers behaviour theory, there is an impassable gap: the

demand that consumer wants and be able to buy, but fails to buy would never become the real

purchasing demand. The common point of these two demands is that consumer wants to buy andbe able to buy. Therefore, the consumers behaviour theory can only define the demand as the

amount that consumer wants to and be able to buy under a certain price.

Interestingly, almost all mainstream economic teaching materials revise the demand definitionwhile admitting the demand definition of consumers behaviour

theory. In the third chapter of the 18th version of Micro-economics published bySamuelson, it introduces the concept the supply and demand and it gives an

assumption of demand and supply chart about corn chips in society under different

prices. According to the data in chart, it draws a demand curve that slopes lower right

and it describes the demand law as: when a commodity price rises (other conditionsdo not change), the purchaser would buy less. Under the same reason, when price

reduces and other conditions do not change, the demand would increase. As

Samuelson has not directly given the definition of demand, we can only guess itsdefinition: 1. Define the real consumption amount of corn chips at a certain price

within a year as the demand and deny the amount that consumer wants to and be able

to buy, but fails to buy. 2. Although it emphasizes that other conditions do not change,compared with consumers behaviour theory, it cancelled the fourth constraint

condition: corn chips are purchased year buy year, or there are new disposable

incomes, or every purchasing would consume all disposable incomes. 3. Introduce theconstraint condition of time for the demand definition: the time intervals of every

price are the equal. This paper calls this constraint condition as the equilibrium

condition of time. The consumers behaviour theory talks about the one-off

consumption and there is no time constraint. Although Samuelson emphasizes thatother conditions do not change, his definition of demand and that of consumers

behaviour theory are not the same. Especially, he cancelled the fourth constraint

condition and the consumers behaviour theory cannot prove the demand law. In otherwords, the consumers behaviour theory cannot prove the demand law that Samuelson

took an example.

In the teaching material of Micro-economics[3], written by Paul Krugman and

Robin Wells, the commodity example that describes the demand law is hockey game

tickets. Krugman do not mention the constraint condition in consumers behaviour

theory that other conditions do not change and it directly gives the definition of


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demand and demand amount: demand chart indicates the amount that consumers are

willing to purchase for a certain product or service under different prices. Demand

curve is a vivid description of demand chart. Demand amount is the amount theconsumers actually want to purchase at a certain price.

The demand example given by Krugman is an exemption of one-off consumption.The farewell match tickets of Wayne Gary are the solely tickets which would never

happen again in history. This point is the same with consumers behaviour theory. The

difference is that this example indicates the demand of society for one-offconsumption and it is related with the highest price consumers can accept (that is

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reserve price) and it is irrelevant with other commodity prices and the constraint

condition of personal disposable income; no matter the personal income and othercommodity prices in April 1999 change or not, at least at the night consumers

purchase the tickets, as the consumption time is very short, we can regard that the

constraint condition 1 and 2 are true; at the same time, the tickets may be not normalcommodities: if the ticket price reduces, the number of consumers who would accept

this price increases and the competitiveness for ticket purchasing also increases.

Analyzing objectively, the consumers who can originally obtain the tickets with highprice, although the reducing of price leads to the increasing of personal relative

income, the probability for obtaining this ticket becomes smaller. Observing from the

subjective willing, without considering the factor of giving for free, although the

ticket price reduces, consumers would not buy more. This indicates that there is afundamental difference between the demand definition given by Krugman through the

example of tickets and the demand definition of consumers behaviour theory.

If the demand example of Kurgman implies the concept of reserve price, HarryVarian clearly proposed the concept of reserve price in his works of

Mircro-economics: Modern Viewpoint[4]. The example Varian is house renting:consumers who accept high reserve price would rent in downtown and consumers

who accept low reserve price would rent in suburban. He also proposed: the curve

that relates specific price and number of people who accept this price is the demand

curve. The definition of demand amount of Varian is not the commodity amountconsumers actually consume or want to, be able to and fail to consume. It is the

amount of consumers who accept specific price. Superficially, the demand amount

defined by Krugman and Varian are not in common. Actually the demand amountdefined by Krugman is also the number of people who are willing to buy tickets at a

specific price and he take this number as the ticket purchasing number.

Mankiw gives an example about personal demand in his works of Principle ofEconomics [5] of 5th version. In this example, Catherine consumes ice cream egg rolls

and assumes that every price remains a month. Similar with Samuelson, Mankiw only

accept the egg roll amount consumers actually purchase under a specific price withina month is the personal demand amount. For example, in the month when the price of

egg roll rises to 3 dollars, the consumer does not buy and Mankiw takes the demand

amount of this consumer as zero. In the example taken by Varian, when the house rent

rises to 500 dollars, no one would rent and the demand amount is taken as zero at thisprice, which is the same with the conclusion of Mankiw. Actually, for real

consumption at a specific price, there are two conclusions: 1. Demand amount is zero;

2. Consumers want to but fail to buy. If this is also demand, the demand amount is not

zero. The conclusion that admit demand amount as zero is actually to deny the

definition of demand in consumers behaviour theory.Michael Parkin gives another time constraint for the definition of demand

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amount in his eighth version of Mircro-economics[6]:the demand amount of a product

or service refers to the amount consumers purchased in a certain period of time with aspecific price. It is noticed that what Parkin discussed about is the planned purchase

amount in a certain period of time with a specific time. As the time is unclear, the first

and second constraint condition of consumers behaviour theory may be not satisfied,which means that the consumers behaviour theory cannot prove the demand law given

by Parkin.

To sum up, the definitions of demand in mainstream teaching materials of

micro-economics are not unified and are different from the demand definition of

consumers behaviour theory recognized by these teaching materials. If we take the

demand curve rising upper right under a demand definition as the criteria that this

definition is wrong, this paper will prove that all demand definitions mentioned

above are wrong. At the same time, this paper will strictly define the demand and

prove that the demand curve under this definition slopes lower right unconditionally.

Giffen goods are no longer the counter example and the demand law will become

the demand axiom.

2. Giffen Criteria of Demand Definition

As long as a definition complies with the logic, it is acceptable. But when a

concept has various definitions, there must be a criteria for its correctness. We hold

that we can take whether Giffen goods occur under a definition as the criteria to

judge whether the definition is right or wrong.

The difficulty lies in that almost all economists think that the demand law has acounter example. As the counter example is very rare, the demand law is always true.

Therefore, starting from the demand definition, when we prove the demand law under

this definition has a counter example and think that the demand definition is wrong,economists would think that: the proving is right, so is the economics, as the demand

law itself is not always applicable.

This ironic and strange phenomenon not only exists in the theoretical research on

demand, but also in various research fields of economics. The nature of this

phenomenon is that some economists consistently change the concept between theory

and reality: the counter example in theory is the counter example in logic, not the


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counter example in real world. Since a reality problem has been abstracted as a theory,

we shall comply with the basic law of formal logic in theoretical research. If we give

a counter example in logic to a conclusion, this conclusion is regarded as false. Wecannot change a logical counter example of pure theoretical problem into the counter

example of real world to illustrate that the theory wrong in logic is more correct than

the theory correct in logic.

Another strange phenomenon in economics is that the assuming condition of

pure theory is also the constraint condition of applied theory, which is also a concept

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change between theory and reality. The demonstrative research in economics is a

teras produced from this phenomenon.

For a pure theoretical research, so long as its assuming conditions satisfy theinner unification of independence, compatibility and completeness [7,8], it shall not

be doubted. As long as there is no logic error in demonstration process, the theoretical

conclusion deducted from the assuming condition is a correct conclusion, whichneeds no demonstration. A pure theoretical problem has no data demonstration before

connecting with real world.

However, if we apply a theory in reality problem, this theory would become an

applied theory. The premise of theory is assumed as the constraint condition of

application, it must accept the examination of real world. The common error in

economic circle is that on one hand, it change the applied theory into pure theory

and holds that the premise of theory can be not in unified with reality problem; on

another hand, it ridiculously demonstrates whether the theory is in unified with

reality with real data to judge whether the theory is correct.

The demonstrative research shall prove whether the reality problem is unified

with the constraint conditions of applied theory. If in unification, there is no need to

demonstrate the theoretical result and we can guide and predict the reality problemwith theory. If no in unification, even if we prove that reality is unified with

theoretical conclusion through demonstration, this is only a coincidence: on one hand,

this demonstration cannot prove whether the theory is correct or not; on the otherhand, as the constraint conditions of applied theory do not comply with reality, this

theory has no explanation for reality problems. For example: if we would like to

prove the creation of human being is carried out by a creator, we could assume that

the creator is powerful and generous. Since the structure of human being iscomplicated but yet delicate, it seems reasonable that it is created by a creator with

powerful ability and a generous mind. Given that the assumption is not questionable,

the final conclusion seems to match the initial hypothesis that human being is indeeda creation by a powerful and generous creator. However, this conclusion cannot be

verified without further scrutinize of the assumption. Normally speaking, if we do not

take the assuming conditions of applied theory as the constraint condition ofapplication, we can prove any conclusion we want to prove with theory. The method

is to find one or several reasons that can justify themselves and we take these reasons

as the assuming conditions of theory, which can prove the conclusion. The

demonstration can surely prove the unification of conclusion of theory and reality


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problem, thus a probably ridiculous theory is born. As one conclusion may have

various reasons, various theoretical schools are born, but such theoretical research has

no academic values and it has a big side effect on the selection of reality policy anddecision. From this we can see that it is not important whether the assuming condition

of applied theory proposed by Krugman complies with the reality. The methodology

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that the conclusion deducted from theory complies with reality and the demonstration

method in economics are very ricidulous [9].

The premise of applied theory is only the abstraction of reality problems. This

abstraction has the following features: 1. The main features of reality problems mustbe grasped. An excellent theoretical worker shall be good at grasping main features of

problem with least assuming conditions in complex reality problems. 2. The assuming

conditions of abstraction cannot be in complete unified with reality problems. Manyeconomists argue for the inconformity of assuming conditions of theory with reality

based on this. Normally speaking, the earliest theory that grasps the main features of

reality is called the original theory. The assuming conditions and logical analysis of

original theory are always simple. Its importance is that it grasps the great idea ofmain features of reality problems. The original theory has a supreme position in

theoretical research. If the theoretical assumption is irrelevant with reality, the

original theory becomes insignificant. The theoretical research that adds some

conditions in the original assuming conditions is called deepened research. Thedifficulty of deepened research is not the idea, but the widening of constraint

conditions of original research, which makes the logic analysis more complicated.The achievements of deepened research are closer to reality than the achievements of

original research. If the assuming conditions of applied theory can be not in unified

with reality, the deepened research becomes useless.

After organizing some viewpoints of methodology, this paper will summarize

various errors in demand definition.

First of all, we will analyze the error of demand definition and demand law ofconsumers behaviour theory:

1.The consumers behaviour theory unexpectedly assumes that a commodity

reduces its price while being consumed at the same time, which is a

small-probability event. If a theory takes a rare phenomenon as the constraintcondition, this theory has no universality. We hold that the reducing of

commodity price happens in a second. Because if the price reducing has been

keeping a period of uncertain time, it cannot guarantee that the price of other

commodity and personal disposable income maintain the same during thisperiod of time and we cannot understand why consumers still want to

research the probable consumption behaviour before price reducing.

2.For this small probability event, if we define the commodity amount which

consumer wants to and be able to buy as the demand, under the constraint

conditions of consumers behaviour theory, the conclusion of demand law hasbeen included in the constraint conditions: As the personal disposable

income and other commodity price do not change, the price reducing of

normal commodity would lead to the relative increase of personal disposable

income. According to the definition of normal commodity, this would


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inevitably lead to the price reducing of commodity and increase of

consumption amount. As the conclusion of consumers behaviour theory isincluded in the assumption, the assumption and conclusion of this theory are

equivalent proposition: we assume one proposition is true and then prove this

proposition is true, then the proving of consumers behaviour theory fordemand law is the logic circular argument.

3.Consumers behaviour theory has proved the existence of Giffen goods and

holds that the inferior commodities in abnormal commodities are Giffen

goods. According to the Giffen criteria of demand definition given by this

paper, the demand definition of this theory is wrong. It shall be pointed outthat under the assumption that personal disposable income and other

commodity price do not change, not only the inferior commodities are Giffen

goods, but all the abnormal commodities are Giffen goods: when the

abnormal commodity reduces its price, as the price of other commodities andpersonal disposable income remain the same, this leads to the relative

increase of personal disposable income. According to the definition ofabnormal commodity, the price reducing of this commodity would inevitably

lead to the decrease of demand and thus the abnormal commodity becomes

Giffen goods. Therefore, Giffen goods are not rare.

4.The important reason for the rare Giffen goods is that under the framework

of consumers behaviour theory and two commodity models, only when the

abnormal commodity reduces its price, its income utility is negative and thecommodity the absolute value of whose income utility is larger than

substitute utility is Giffen goods. Based on this, we find that Giffen goods

hardly exist. Mr Zhang Wuchang even wrongly thinks that the Giffen goodsonly exist in logic and do not exist in reality [1]. This criterion about Giffen

goods comes from Hicks decomposition. The income utility and substitute

utility defined from this originate from the rotating and translating of budgetconstraint line and there are no data supports in real world. The

demonstration work about Giffen goods changes the concepts of income and

substitute utility in Hicks decomposition, or it wrongly uses demonstrative

data. The demonstrative proving that Giffen goods hardly exist are all wrong[10].

Next, we will talk about the incorrectness of various demand definitions in two

aspects: one is to directly point out the incorrectness of examples taken by variousliteratures. Another is to make strict theoretical abstraction for the common features

of demand in these examples and prove that the demand definition with such abstract

features can inevitably get the conclusion that all commodities may be Giffen goods.

The basic requirement for theoretical workers in abstracting theoretical model

from complicated reality world is to find out the common feature of research object


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(main features) and ignore its personality. The common point of Samuelsons corn

chips and Mankiws ice cream egg rolls is: it is assumed that the price is equivalent

with time. But this assuming condition is always not in conformity with reality.

Once this condition is abandoned, the corn chips and ice cream egg rolls may

become Giffen goods. Taking egg rolls for example, it is free in the first month and

Mr C eats 12. The price is 50 cents in the second month, Mr C eats 10. If the price

does not rise in the third month, Mr C also assumes 10. If we draw a demand curve

with the total consumption of Mr C at this point of time, this curve would inevitably

rise upper right and becomes the counter example of Giffen. From this we can get

that the demand definition of Samuelson and Mankiw is wrong.

The common feature of examples of Krugman and Varian is that the commodity

has nonrenewable scarcity and there is no obvious competition among suppliers. The

competition occurs among consumers. In this kind of examples, it is the basic

principle of supply to sell commodity to the consumer whose reserve price is the

highest and it is the inevitable choice for price discrimination. Varian holds that the

curve of the reserve price and number of people who accept this price would

inevitably slopes lower right.

Regretfully, the above curve is not the demand curve. The condition forchanging the curve to a demand curve sloping lower right is very simple: it is

assumed that the demand amount of every consumer for commodity is the same. But

this simple condition is not always satisfied. Taking the example of Krugman, ifpeople who accept high price purchase more tickets to give to other people than

people who accept low price, this condition fails. In the example of Varian, if

consumers rent part or all houses and then rent to other people with the goal ofinvestment (called principal tenant in market), the curve constituted by reserve price

and number of people who accept this price would not change to the demand curve

sloping lower right.


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By analyzing the demand definitions in literatures quoted by this paper, it is easy

to find that the common feature of these definitions is to define the consumption

amount under a price as the demand amount. Distinguished from the consuming

behaviour, this consumption amount can be the real consumption amount, or the

consumption amount that consumers want to, be able to, but have not bought yet at a

certain time point, or even can be the consumption amount that consumers want to,

be able to, but fail to buy. Distinguishing from the time, it can be an one-off

consumption, or consumption within a period of given time, or even the so-called

static or quasistatic consumption irrelevant with time. Under this abstract demand

definition, there is the following axiom:

Axiom: if we define the consumption amount under a price as the demand

amount and it can form a demand curve sloping lower right. According to the same

definition, it can constitute numerous curves of Giffen goods.

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Prove: we take any point in the demand curve as point 0, and the corresponding

price and demand amount of this point are P(0) and Q(0). Then we randomly selecttwo points below the downward sloping demand curve to represent consumption

amount Q(1) and Q(2), which meets the conditions: 1. Q(2)>

Q(1); 2.Q(1)+Q(2)Q(0); 3. The corresponding prices of Q(1) and Q(2) on the demand

curve are P(1) and P(2) respectively and P(0)P(2)>P(1). It is easy to see that: 1.

The demand curve constituted by P(1) and P(2) as well as Q(1) and Q(2) is theso-called demand curve of Giffen goods; 2. It is noticed that Q(1)+Q(2) Q(0) and

P(2) P(0). This Giffen goods curve does not violate the demand law that it can only

close out the amount of Q(0) under the price of P(0), but it violates the demand law

conclusion that demand amount is in negative correlation with price. It is noticedthat the randomness of selecting any point in this demand curve and the infinite

probability of P(1) and P(2), Q(1)and Q(2) to adjust under the constraint conditions

can constitute numerous counter examples of Giffen. In real world, such counter

examples of Giffen do not exist. However, mentioned as before, the counter examplein logic can sufficiently deny the demand concept of this axiom and the university of

demand law will be challenged.

3. New demand definition and demand axiom

For getting a sloping demand curve unconditionally, we must redefine the demand.

In the definition, there is no need to distinguish the difference of demand and

demand amount. The so-called demand is the measured demand amount.

Definition of demand: the demand of a consumer under a price means that in the

given time interval, the summing of real consumption amount of a consumer in theclosed interval of this price and reserve price.

Reserve price is the highest acceptable price of consumer for a commodity. It isthe necessary condition not the sufficient condition that commodity price is not higher

than the reserve price of consumer: in market, even if a consumer has sufficient

disposable incomes and the commodity price is not higher than the reserve price, as

long as the consumption demand of consumer has been satisfied, consumers wouldnot continue to consume this commodity.

First of all, we compare several definitions in the space constituted by time and

price: the demand defined by consumers behaviour theory is the demand of a

consumption behaviour and this demand is a point in the space constitute by price

and time, which can be called as point demand. The demand definition of


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mainstream economics refers to the summing of consumption amount under a price

within a time period. This demand is a surface in the space constituted by price

and time and it can be called as surface demand. Line demand includes point

demand and surface demand includes line demand.

Next, we compare the difference of several demand definitions from the

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consumption amount category. The consumption amount can be categorized into three

kinds: one is the consumption amount already happened in this time period; one is theconsumption demand to happen in future; one is the consumption amount which

consumers want to, be able to and fail to buy. We call these three consumption

behaviours as already-consumed behaviour, to-be-consumed behaviour and fakeconsuming behaviour. For the conclusion of mainstream economics in demand

definition, one important reason is that the opinions for the demand scope of these

three consumptions are not in conformity. Different scholars have differentviewpoints and the same scholar would have different viewpoints in the same

literature. We have no contest for the first kind of consumption being accounted as the

demand. Whether the future consumption amount can be accounted as demand is

related with whether there is time constraint in demand definition. If we define thedemand as the static demand irrelevant with time, it is to carry out time integral for

the demand relevant with time. The concept of future demand does not exist and this

kind of consumption also belongs to the scale of demand. But this kind of demand

cannot be quantified and the future consumption amount would be influenced byvarious factors and become unclear, which is also unhelpful to the theory and

application research of economic. This paper holds that future consumption that doesnot happen within the time period do not belong to the demand in this time period.

This concept is easy to understand: the longer the consumption time, the larger the

total social demand. The inner reason for fake consumption is different with that of

consumption which consumer wants, cannot and does want to buy, but the outerexpression in market is completely the same. Consumers never have real consumption

behaviours and we cannot get specific data of demand. Observing from the angle of

math, even if we carry out time interval integral about(-,+)

in time axis for

consumption amount, the consumption amount of the third kind is still fakeconsumption and it must be excluded out of the scale of demand research. The

consumers behaviour theory wrongly categories the third kind of consumption into the

scale of demand and it also define the one-off third-kind consumption at the timepoint as the demand (notice: one-off consumption is a transient consumption and the

third-kind consumption has no standing point in time axis. The one-off third-kind

consumption itself is a contradictory concept). If it is not defined in that way, the

consumers behaviour theory which researches one-off consumption behaviour canneither give two demand amounts, nor research demand law.

Finally, we compare the difference of several demand definitions from thedemand subject. Although we can analyze the relationship between price and demand,

the subject of demand is consumers, not price, which is a common knowledge. For

this problem, Consumers behaviour theory, Samuelson, Krugman, Varian, ZhangWuchang, Mankiw and Parkin have wrong understandings and thus it leads to the

misunderstanding of demand definition. Taking a simple example: we set that within

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a time period, the price of a commodity is P1, the consumption amount of a consumer

in this time period is Q1, the consumption amount of consumer at price P1 and thedemand amount of consumer in this time period are completely the same. At this time,

it is not important to distinguish whether the subject of demand is consumer or price,

as these two understandings cannot lead to the divergence of conclusion. However, ifin this time period, the price of this commodity reduces from P1 to P2, and the

consumption amount of consumer at price P2 is Q2, the demand of consumer shall be

the summing up of two prices, that is Q1+Q2. At this time, the demand of consumer atprice P2 and that at P2 are two totally different concepts. The understanding of the

difference of these two concepts is helpful to understand the difference and

correctness of surface demand defined by this paper and point or line demand

defined by mainstream economics.

Mainstream economists think that the demand of price P1 is Q1, and the demand

of price P2 is Q2, only when Q2>Q1, the demand law is true. But according to the

demand definition of this paper, only when Q2 is not zero, the demand law is true

unconditionally. Even if Q2 is zero, the personal demand curve would not rise upper

right. For the whole society, due to the difference of personal reserve price, the

consumption amount of price P2 would always be larger than zero, thus the social

demand curve slopes lower right unconditionally. We hold that the demand law does

not require that the individual consumption amount after price reducing must be

larger than that before the price reducing, but it requires that the individual demand

amount after price reducing is not smaller than that before price reducing. Under the

demand definition of this paper, demand law becomes demand axiom and there is no

counter example. For example, before the new product of iphone is issued, the price

of old iphone would reduce. Consumers who have owned old iphone before price

reducing would not purchase more old iphones. This phenomenon commonly exists

in market of high scientific products. If according to the understanding of

mainstream economics, such consumption behaviours have violated demand law and


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iphone or other high scientific products can only be Giffen goods. But according to

the definition of this paper, such consumption behaviours do not violate demand law.

The confusion of concepts of demand amount and consumption amount is the sever

error of mainstream economics. Under the demand definition of this paper, the

demand curve of Giffen goods also slopes lower right and the demand law becomes

an axiom.

Demand axiom: under the demand definition of this paper, the personaldemand curve at least would not rise upper right. The social demand curve

rises upper right unconditionally.

Discuss:

1. The mainstream economics define the demands as those consumers want toand be able to buy. Such definition implies an assumption: the commodity price that

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consumers want to and be able to buy exists in market. The demand law researches

the relationship between various prices and consumers demand and the price indemand law does not satisfy this implied assumption. If this price does not exist, it is

meaningless to discuss about the demand that consumers want to and be able to buy.

For example, one-yuan villa and one hundred-yuan Boeing plane. Many consumerswant to and be able to buy, but this is not market demand, thus it needs an extra

constraint condition: available. Being available means that this price exists in market,

which is in conformity with the implied constraint that consumers want to and be ableto buy: under this constraint, we hold that the demand at price P1 is Q1 and Q2 is not

available at price P1.

2. Surface demand curve is actually a segment. The upper limit is the reserveprice and lower limit is the lowest market price in this time period. Above the reserve

price, the demand is zero and under the lowest market price, consumers demand can

be treated in two ways: 1. Reality method: we do not discuss about the customers

demand without market price; 2. Rationality method: although this price does notexist in market, the consumers demand is confirmed at this price according to the

definition of this paper. At this time, the demand at this price and the demand at thelowest price in market are the same and the demand curve at least would not rise

upper right.

3. The understanding of this paper about demand that consumers want to and be

able to buy is different from the understanding in the theoretical significance ofconsumers behaviour theory. We hold that want to buy is indeed the subjective

willing of consumers, but this willing may be relevant with physiological needs or

with preference. But the physiological needs and preference would never remain thesame. As the consumers behaviour theory which researches transient consumption

behaviour, the assumption that the subjective willing of demand does not change can

be accepted, but the assumption that the demand willing in a given time period neverchange cannot be accepted. Be able to buy is the paying ability of consumer. The

consumer only shall have the disposable income that can at least buy one complete

commodity that he/she wants to buy, the be able to buy condition can be satisfied.It does not force to use disposable income in a group of commodity consumption for

one time.

4. Strictly speaking, under the demand definition of this paper, a demand curve

rising upper right may also occur: if at price P2, the consumption amount ofconsumer is not only zero, but part or all commodities purchased at price P1 would

be sold at price P2. At this time, the demand curve would rise upper right. Such

phenomenon always happens in stock market and the middle men in the commoditycirculation link. In order to evade this phenomenon, this paper define consumers as

pure consumers and they do not participate in the second change of commodity and

the commodities they purchase are only used in pure consumption. It is not a13


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consumption behaviour to sell the purchased commodity.

Acknowledgements:

The author has carried out beneficial discussion about part or all viewpoints of

this paper with professor Wang Xi, Qing Shuo, Wang Zeke, Chen Pin, He Xingqiang,

associate professor Ni Debing, Niu Hong, doctor Wu Yilin, Mr Zhong Lin and YangJian. Their constructive or critical opinions benefit the author a lot. Here I express my

hearty thinks to them!

Literature

[1]Zhang Wuchang. Talk about Demand Scientifically [M]. China Citic Press.2010

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.Microeconomics[M].McGraw-Hill, 1992[3] Paul Krugman, Robin Wells.Microeconomics[M] .W H Freeman & Co, 2006

[4] Hal Ronald Varian .Intermediate Microeconomics: A Modern Approach[M] 8th Edition[5] N. Gregory Mankiw (2006). Principles of Economics, 4th Edition. South-Western

College Pub.

[6] Michael Parkin.Economics .10th EditionPrentice Hall.2011

[7] Koopmans, T., 1956, Three Essays on the State of Economic Science, New York:McGraw-Hill.

Lin Yifu, 2005, Economics Method, Beijing: Peking University Press.

[8]Koopmans, T., 1979, Economics among the Science, American Economic Review 69:

1-13.

[9] Friedman, M., 1953, The Methodology of Positive Economics, Essays in PositiveEconomics, Chicago: University of Chicago Press.

[10]He Yiping Zhaogang Gong Xiaoming Giffen Goods Theory under Demand Law to be

published14

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