# Questions tagged [income-effect]

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### 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 ...
67 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 ...
13 views

### IS-LM : monetary policy in SOE that exports inferior goods

If I follow the IS-LM model (or some derivative of it), a small open economy can really only use monetary policy to change GDP in the short term. According to the model (or one of its spin-offs), if ...
40 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 ...