The Theory of Market Demand (Recent Developments) A. The Pragmatic Approach to Demand Analysis: Many writers have questioned the usefulness of the various theories of consumers’ behaviour. There has been an increasing awareness that although the various approaches to utility are theoretically impressive, there is very little an applied economist can use to explain the complexity of the real world. Thus many writers have followed a pragmatic approach to the theory of demand. They accepted the fundamental ‘law of demand’ on trust, and formulated demand functions directly on the basis of market data without reference to the theory of utility and the behaviour of the individual consumer. Demand is expressed as a multivariate function, and is estimated with various econometric methods. Such demand functions refer obviously to the market behaviour of the con- sumers, that is, to the behaviour of all consumers as a group, and not to the behaviour of single individuals. Furthermore, in most cases the demand functions refer to a group of commodities, e.g. demand for food, demand for consumer durables, etc. Serious difficulties arise in estimating demand functions. The aggregation of demand over individuals and over commodities makes the use of index numbers inevitable, but the problems associated with such indexes are numerous. Furthermore, there are various other estimation problems which impair the reliability of the statistically-estimated demand functions. The most important of these difficulties arise from the simultaneous change of all the determinants, which makes it extremely difficult to assess the influence of each individual factor separately. However, there has been a continuous improve- ment in the econometric techniques and currently demand functions are fairly easy to estimate statistically.