HICKSIAN AND SLUTSKY APPROACH PDF

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The compensated demand curve shows only the substitution effect and ignores the income effect of change in prices. The utility is taken to be constant from the price change. There are two approaches used to explain the substitution effect: Hicksian and Slutskian.

Become a Study. Try it risk-free for 30 days. Log in. Sign Up. Explore over 4, video courses. Find a degree that fits your goals. Question: What is the difference between Hicksian and Slutsky theories in the demand curve? Compensated Demand Curve: The compensated demand curve shows only the substitution effect and ignores the income effect of change in prices.

The difference between Hicksian and Slutsky theories in the demand curve: Demand curve proposed by John Hicks expresses a demand for consumption See full answer below. Ask a question Our experts can answer your tough homework and study questions. Ask a question Ask a question. Search Answers. Learn more about this topic:. Try it risk-free. Price Elasticity of Demand in Microeconomics. How to Calculate Opportunity Cost. Shifts in the Production Possibilities Curve. College English Composition: Help and Review.

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What is the difference between Hicksian and Slutsky theories in the demand curve?

The compensated demand curve shows only the substitution effect and ignores the income effect of change in prices. The utility is taken to be constant from the price change. There are two approaches used to explain the substitution effect: Hicksian and Slutskian. Become a Study. Try it risk-free for 30 days.

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The Hicksian Method and The Slutskian Method

By using our site, you acknowledge that you have read and understand our Cookie Policy , Privacy Policy , and our Terms of Service. Economics Stack Exchange is a question and answer site for those who study, teach, research and apply economics and econometrics. It only takes a minute to sign up. When deriving the substitution effect for both Slutskian and Hicksian definitions, a 'phantom' budget line is drawn. However, for a Slutskian definition, the 'phantom' budget line is drawn parallel to the new budget line change in price and through the point of tangency for the original budget line and indifference curve. On the other hand, for a Hicksian definition, the phantom budget line is drawn parallel to the new budget line change in price and lies on the original indifference curve on a different point of tangency. Is there any significance to this inherent difference between the Slutskian and Hicksian approaches when deriving the substitution effect?

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