Acta Universitatis Danubius. Œconomica, Vol 8, No 1 (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

Catalin Angelo Ioan, Gina Ioan

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.

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