ECON 100A Lecture Notes - Lecture 21: Hicksian Demand Function, Substitute Good, Indifference Curve

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Published on 17 Nov 2016
Utility function for which marshallian and hicksian demand are the same?
- marshallian demand: move from e1 to e3 (total effect)
- hicksian demand: move from e1 to e2 (substitution effect)
- since marshallian and hicksian has to be the same, income effect has to = 0
- Perfect complements
o substitution effect = 0
o cannot substitute between one or another since the two has to be
consumed in ratio
o income effect e2 to e3
- perfect substitutes
o case 1
red: indifference curve
marshallian demand is not responsive to change in price
total effect = 0
substitution effect = 0
income effect = 0
o case 2
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