ABSTRACT
In microeconomics there are three well-known and highly used demands. They are the Marshallian, the Hicksian, and the Walrasian demands, which deal with what consumers will buy in different situations so as to maximize their profit. This chapter introduces some useful results like Shephard's lemma and the Slutsky equation, and discusses so-called Giffen and Veblen goods. The lemma is used in microeconomics in applications to the theory of the firm and consumer choices. Named after Alfred Marshall, the Marshallian demand in microeconomics specifies what the consumer would buy in each price and income or wealth situation, assuming it perfectly solves the utility maximization problem. It is compared with Walrasian demand, also known as uncompensated demand, since the original Marshallian analysis ignored wealth effects. Hicksian demand functions are often convenient for mathematical manipulation because they do not require income or wealth to be represented.
