CONDITIONAL DEMAND FUNCTIONS AND CONSUMPTION THEORY.

The article discusses conditional demand function and its application to the problems in the theory of consumer behavior. If the individual's allotment of the preallocated good remains fixed, his conditional demand functions meet all the requirements satisfied by ordinary demand functions. Conditional demand functions are an appropriate tool for analyzing consumer behavior in several situations. Consumers, like firms, have commitments which are fixed in the short run, so it is useful to distinguish between long-run and short-run consumer behavior. Conditional demand functions can also be used to deal with nonmarket goods. For example, the availability of goods provided by the government without charge to the user may affect the individual's preference between collections of goods available on the market. In this case, variables representing the availability of goods of this type will appear as arguments of the individual's utility function and his demand functions. Thus, the availability of free public tennis courts may affect the way an individual allocates a given total expenditure between tennis balls and other goods.