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difference between hicks and slutsky's substitution effects of a price change

by Guest11603283  |  4 years, 11 month(s) ago

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difference between hicks and slutsky's substitution effects of a price change

 Tags: Change, difference, Effects, Hicks, price, slutskys, Substitution

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8 ANSWERS

  1. Guest22303205

    why is hicksian's demand curve flatter than slutsky's demand curve?

  2. Guest21899516

    Hick son approach Slutsky approach Why is this difference?
    1 Keeping same price, price ratio is same after price change of our good.
    Same price but new price ratio after price drops of our good. New AND DIFFERENT indifference curve in Slutsky effect, allowing the consumer to choose indifference curve of Hick son approach
    2 Old income level
    Old income level Income level is kept constant.
    3 Same satisfaction level New satisfaction level i.e. its previous satisfaction level will change Difference curve for all equilibriums in three lines are unique in Slutsky approach while in hick son approach E1 and E2 has same indifference curve.

    In nutshell, Slutsky solution is based upon Pasches index (change in real income)
     

  3. Guest20911283
    Hicks focuses on keeping the level of utility constant, or at least the same as before the change in the price and therefore the budget line. Using his method to decompose the indifference curve into the income and substitution effects is better for welfare comparisons as it provides the income change that is just enough to make the consumer 'feel' as well off as before. Slutsky, on the other hand, is more concerned with keeping the consumption bundle constant. He therefore focuses on the settlement of a new indifference curve, albeit one which compensates for the shift in the budget line to account for the original level of consumption(consumption bundle) It is easier to calculate and estimate because it is based on observable income and prices. But that is irrelevant because the two methods and their associated compensations are used to answer slightly different questions. Thus, the choice of methods should depend on the purpose to which it is put. For further review, refer to "Economics" by Lipsey and Chrystal.
  4. Guest20698846
    the main difference is slutskys method places the consumer on an higher indifference curve
  5. Guest20188945
    1 the main difference between hicks and slutsky substitution effect is that hicks keeps utility constant rather than keeping purchasing power constant 2 slutsky substitution effect gives the consumer just enough money to get back to his old level of consumption while the hicks gives the consumer just enough money to get back to his old indifference curve surya
  6. Guest17017183
    how can one determine either hichs or slutsky income subtitution effect
  7. Guest17017183
    what is the diference between hicks and slutsky income subtitution effect
  8. Guest12271884
    1 the main difference between hicks and slutsky substitution effect is that hicks keeps utility constant rather than keeping purchasing power constant 2 slutsky substitution effect gives the consumer just enough money to get back to his old level of consumption while the hicks gives the consumer just enough money to get back to his old indifference curve

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