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An Analysis of the Substitution Effect and of Revenue Effect in the Case of the Consumer’s Theory Provided with a CES Utility Function

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Listed:
  • Catalin Angelo Ioan

    (Danubius University of Galati, Romania)

  • Gina Ioan

    (Danubius University of Galati, Romania)

Abstract

In the consumer’s theory, a crucial problem is to determine the substitution effect and the revenue effect in the case of one good price’s modifing. There exists two theories due to John Richard Hicks and Eugen Slutsky which allocates differents shares of the total change of the consumption to these effects. The paper makes an analysis between the two effects, considering the general case of a CES utility function and introduces three indicators which will characterize these shares.

Suggested Citation

  • Catalin Angelo Ioan & Gina Ioan, 2012. "An Analysis of the Substitution Effect and of Revenue Effect in the Case of the Consumer’s Theory Provided with a CES Utility Function," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 1(1), pages 164-175, March.
    • Handle: RePEc:dug:actaec:y:2012:i:1:p:164-175
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    References listed on IDEAS

    as
    1. S K Mishra, 2010. "A Brief History of Production Functions," The IUP Journal of Managerial Economics, IUP Publications, vol. 0(4), pages 6-34, November.
    2. Revankar, Nagesh S, 1971. "A Class of Variable Elasticity of Substitution Production Functions," Econometrica, Econometric Society, vol. 39(1), pages 61-71, January.
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    Keywords

    CES; substitution; revenue; utility;
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