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Inconsistencies in Textbook Presentation of Substitution and Income Effects

Author

Listed:
  • Julien Picault

    (UBC Okanagan)

Abstract

Labour economics textbooks present inconsistent methods for determining substitution and income effects. Hicks (1939) and Samuelson (1953) developed two different methods separating substitution and income effects. While both methods result in the same conclusion regarding the direction of the effects, they differ on magnitude of the effects. Furthermore, economics instructors are typically unaware of the inconsistency in labour economics textbooks, causing them to consider students? answers as incorrect when they may not be. This paper advocates for the selection of a standard approach in labour economics instruction, and acknowledges that these different methods are currently a source of confusion for students.

Suggested Citation

  • Julien Picault, 2016. "Inconsistencies in Textbook Presentation of Substitution and Income Effects," International Journal of Teaching and Education, International Institute of Social and Economic Sciences, vol. 4(3), pages 7-15, September.
    • Handle: RePEc:sek:jijote:v:4:y:2016:i:3:p:7-15
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    References listed on IDEAS

    as
    1. repec:ebl:ecbull:v:2:y:2002:i:2:p:1-6 is not listed on IDEAS
    2. Ambrose Leung & Maureen McGregor & Justin Chesney, 2014. "Income and Substitution Effects: Graphical Analysis for Intermediate Microeconomics," Journal for Economic Educators, Middle Tennessee State University, Business and Economic Research Center, vol. 14(1), pages 97-107, Fall.
    3. Christian Weber, 2002. "Did Pareto discover income and substitution effects? On an interpretation suggested by Hutchison," Economics Bulletin, AccessEcon, vol. 2(2), pages 1-6.
    4. Pierre Cahuc & André Zylberberg, 2004. "Labor Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 026203316x, December.
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    More about this item

    Keywords

    Substitution effect; Income effect; Textbook; Cost-Difference; Compensating Variation;
    All these keywords.

    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General

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