Level: Ungrad, Micro

I have a task, http://imgur.com/a/JT4zB I have done some questions. While I can't understand the differences between Slutsky and Hicks approach. I get it theoreticaly, but I don't know what differences would appear during solution. Please help with substitution-income effect calculation.

P.S. I have calculated substitution effect somehow, but I'm not sure wich approach that would be.

Any help is appreciated.


closed as off-topic by Giskard, dismalscience, BKay, Kitsune Cavalry, Wecon Sep 22 '16 at 6:11

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Hicks compensation ensures that the consumer will reach the same utility level after the price/wealth change. (So graphically will be on the same IC)

Slutsky compensation ensure that the consumer can afford the old bundle after the price/wealth change. (so graphically rotates around the old bundle)

So when working out a problem, you can spot the difference when the consumer either has the same utility level, or can afford the same bundle.


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