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The Substitution Effect and the Profit Function in Consumption: expressions from the Marshallian, Hicksian, and Frischian demand functions

Gimenez-Nadal, Jose Ignacio and José Alberto Molina ()
Authors registered in the RePEc Author Service: Jose Ignacio Gimenez-Nadal ()

MPRA Paper from University Library of Munich, Germany

Abstract: In the context of the maximizing behaviour assumption (Becker, 1976), an individual usually maximizes the utility function, minimizes the cost or, finally, can also maximizes the profit function in consumption, with each of these three optimization problems providing a type of demand function: the Marshallian, the Hicksian, and the Frischian. In all three cases, an important concept for both theoretical and empirical reasons is the Substitution Effect (SE), with this measuring the substitution phenomenon in the demanded quantity in function of the price change. In this context, our short paper offers certain alternative theoretical expressions of the Substitution Effect, focusing on the Profit Function in Consumption, thus introducing the inter-temporal context with perfect information.

Keywords: Demand analysis; Substitution Effect; Profit Function in Consumption; Marshallian, Hicksian and Frischian demand functions (search for similar items in EconPapers)
JEL-codes: D11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff and nep-upt
Date: 2017-10-28
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