class 6 Slutski and Surplus2 post

# class 6 Slutski and Surplus2 post - Class 6 Slutsky...

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Class 6 Slutsky Decomposition Measuring Welfare

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What we did last time emand Function: Changing Prices ± Demand Function: Changing Prices ± Engel Curve: Changing Income ± Hicks Demand Curve: Changing Relative Prices ± Decomposition: ± The “Substitution Effect” he “Income Effect” ± The Income Effect ± Putting it all together
Demand: Decomposing the Change Decomposition important: ± Demand Forecasts 20 L * ± Compensation 15 L 2 L 1 e* ± Labor Market ± Macroeconomic Forecast q 1 , Music CDs, 69 1 2 e 2 e 1 I 2 I 1 Units per year Income effect Total effect Substitution effect

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Outline ecomposition: ± Decomposition: ± The “Substitution Effect” he “Income Effect” ± The Income Effect ± Putting it all together ± Application: Labor Market ± Measuring Welfare ± Midterm
Income Elasticity q 2 1 PercentageChange in Q Percentage Change in Y ξ= q 1 Y 11 : p q Budget Share Y θ= D 1 (p, Y)

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Slutski Decomposition () ) E UHU q 2 11 1 ( , ( , )) ( , ) D p E p UH p U 1 DH D E p pY p ∂∂ ≡−
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## This note was uploaded on 12/10/2011 for the course ECON 401 taught by Professor Burbidge,john during the Winter '08 term at Waterloo.

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class 6 Slutski and Surplus2 post - Class 6 Slutsky...

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