Skip to main content

Questions tagged [income-effect]

The tag has no usage guidance.

Filter by
Sorted by
Tagged with
0 votes
0 answers
26 views

Increase in income in an economy would increase

Increase in income in an economy would increase the following except Consumption Savings Imports Exports
Janu's user avatar
  • 1
0 votes
1 answer
169 views

Could Gaza have been "one of the wealthiest states on the Mediterranean"?

According to this transcript, (I don't have access to the original interview), Robert Kennedy told Krystal Ball: The international aid agencies have given Hamas, have given Gaza more than 10 times ...
YouDontSay's user avatar
0 votes
1 answer
32 views

the income elasticity at the mean values

What is the formula of the income elasticity at the mean values? I have two variables, I is income and C is consumption. And I have 10 observations (sample size) Regresison equation $$C = a + bI $$ ...
studentp's user avatar
  • 150
1 vote
1 answer
119 views

Income effect in perfect substitutes if the already cheaper good becomes more cheaper?

Consider a simple utility function U(x,y) = x+y such that Px < Py (which means only x is being consumed at optimal point, a corner solution). In this case, assume Px falls further. Now won't the ...
Polario's user avatar
  • 143
0 votes
2 answers
208 views

Can the income and/or substitution shift the demand curve?

As the question says, can either the income or substitution effect cause the demand curve to shift? I understand that both income and substitution effects are key determinants of the shape of the ...
StatsScared's user avatar
1 vote
1 answer
195 views

Using Slutsky method to understand substitution and income effect for luxury goods

If both goods are luxury goods, such as Channel vs Dior bags, how can you graph the substitution and income effect using the Slutsky method when the price of Channel bags fall? What I've tried: ...
Christina Joo's user avatar
1 vote
1 answer
120 views

Income and Substition Effect: Assumptions: Normality vs. Inferiority of Goods

A question concerning the income and substitution effect when the wage changes Let us assume that the substitution effect leads to more less leisure as the relative price of leasure increases, and ...
Tenetet's user avatar
  • 11
2 votes
2 answers
365 views

Income and substitution effect: why MRS=relative prices?

I'm trying to understand how to solve an exercise about income and substitution effects. I got the theory, I guess, but can't get the maths. One of the steps would be to put in a system the equation ...
FuzzyOperator's user avatar
3 votes
0 answers
249 views

Logarithmic utility and and cancellation of income and sub effects

From these notes by Per Krussel on page 16, the author writes that "With logarithmic utility, a relative price change between two goods will make the consumption of the favored good go up ...
Kwame Brown's user avatar
3 votes
1 answer
413 views

Hick's and Slutsky's approaches lead to different income effects. Why?

Suppose a cup of coffee and a plate of beans are sold at € 1 and € 3 respectively during the winter. In summer, the government decides to remove the subsidy on coffee and its new price per cup goes up ...
Isa's user avatar
  • 87
1 vote
2 answers
305 views

Are there estimates of how much salaries are affected by income tax rates?

A few years ago I've asked Why are some wage taxes officially paid by the employer, even though they're really paid by the employee? where @Relaxed mentioned the following: Arguably, the notion that ...
JonathanReez's user avatar
0 votes
1 answer
71 views

How is Elon Musk's free Tesla charge a sustainable business model?

I came across this video, where Elon says charging a Tesla car at Tesla supercharge station is free and will be free always How is this a sustainable business model? Where will the money for ...
Daniel Chase's user avatar
1 vote
1 answer
681 views

Is Hicksian always steeper than Marshallian?

The compensated demand curve eliminates income effects. It reflects only substitution effects. Given that the Marshallian demand curve reflects income effects, doesn't this mean it is always more ...
kleinerde's user avatar
  • 309
0 votes
1 answer
582 views

Calculate income and sustitution effect from utility funcion

Utility function $U(x_1 , x_2) = x_1 + 4 * x_2 $ $ p_1 = 3, p_2 = 8, m =120 $ $p_2$ changes from $8$ to $10 $ How can I calculate the income and substitution effect. I first thought about calculating ...
Coco Garazzo's user avatar
0 votes
0 answers
77 views

How to calculate substitution and income effect when only 1 bundle is given?

I was given information of a consumer that initially consumed 4 units of both good x and good y with the initial price of $5 for both goods (px = py = 5). The initial budget constraint is 40 = 5x +5y ...
grace's user avatar
  • 1
0 votes
2 answers
102 views

How should I regress income inequality on economic growth?

I would like to know which variables to use to regress income inequality on economic growth. For income inequality, I am thinking of using the Gini index, but don't know what measurement exactly. For ...
Kostas's user avatar
  • 1
2 votes
1 answer
297 views

Meaning of «intertemporal substitution effect dominates the income effect»

Assume a household intertemporal optimisation problem, where they only either consume or labour, and one of the equilibrium conditions states that labour will be a positive function of productivity, ...
An old man in the sea.'s user avatar