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The Substitution Effect and the Profit Function in Consumption: expressions from the Marshallian, Hicksian, and Frischian demand functions

Author

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  • Gimenez-Nadal, Jose Ignacio
  • Molina, Jose Alberto

Abstract

In the context of the maximizing behaviour assumption (Becker, 1976), an individual usually maximizes the utility function, minimizes the cost or, finally, can also maximizes the profit function in consumption, with each of these three optimization problems providing a type of demand function: the Marshallian, the Hicksian, and the Frischian. In all three cases, an important concept for both theoretical and empirical reasons is the Substitution Effect (SE), with this measuring the substitution phenomenon in the demanded quantity in function of the price change. In this context, our short paper offers certain alternative theoretical expressions of the Substitution Effect, focusing on the Profit Function in Consumption, thus introducing the inter-temporal context with perfect information.

Suggested Citation

  • Gimenez-Nadal, Jose Ignacio & Molina, Jose Alberto, 2017. "The Substitution Effect and the Profit Function in Consumption: expressions from the Marshallian, Hicksian, and Frischian demand functions," MPRA Paper 82249, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:82249
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    File URL: https://mpra.ub.uni-muenchen.de/82249/1/MPRA_paper_82249.pdf
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    References listed on IDEAS

    as
    1. J. A. Molina, 1994. "Food Demand In Spain: An Application Of The Almost Ideal System," Journal of Agricultural Economics, Wiley Blackwell, vol. 45(2), pages 252-258, May.
    2. Andaluz, Joaquin & Molina, Jose Alberto, 2007. "How do altruistic parental transfers affect the welfare gains of marriage?," Research in Economics, Elsevier, vol. 61(1), pages 1-9, March.
    3. Jose Alberto Molina & María Navarro & Inmaculada García, 2007. "Modelling interdependences between spouses by estimating income satisfaction," Economics Bulletin, AccessEcon, vol. 4(10), pages 1-5.
    4. José Alberto Molina & María Navarro & Ian Walker, 2011. "Intergenerational Well‐Being Mobility in Europe," Kyklos, Wiley Blackwell, vol. 64(2), pages 253-270, May.
    5. Jose Ignacio Gimenez-Nadal & Jose Alberto Molina & Raquel Ortega, 2012. "Self-employed mothers and the work-family conflict," Applied Economics, Taylor & Francis Journals, vol. 44(17), pages 2133-2147, June.
    6. Ashenfelter, Orley & Heckman, James J, 1974. "The Estimation of Income and Substitution Effects in a Model of Family Labor Supply," Econometrica, Econometric Society, vol. 42(1), pages 73-85, January.
    7. Molina, Jose Alberto & Campaña, Juan Carlos & Ortega, Raquel, 2015. "Time dedicated by consumers to cultural goods: Determinants for Spain," MPRA Paper 68430, University Library of Munich, Germany.
    8. Campaña, Juan Carlos & Gimenez-Nadal, J. Ignacio & Molina, José Alberto, 2015. "Gender differences in the distribution of total work-time of Latin- American families: the importance of social norms," MPRA Paper 62759, University Library of Munich, Germany.
    9. Jose Alberto Molina & Iñaki Vazquez & Joaquín Andaluz, 2007. "The stability of intergenerational cooperation in altruistic families," Economics Bulletin, AccessEcon, vol. 3(39), pages 1-7.
    10. Manoli, Dayanand & Weber, Andrea, 2010. "Intertemporal Substitution in Labor Force Participation: Evidence from Policy Discontinuities," IZA Discussion Papers 5248, Institute of Labor Economics (IZA).
    11. José Molina, 2015. "Caring within the Family: Reconciling Work and Family Life," Journal of Family and Economic Issues, Springer, vol. 36(1), pages 1-4, March.
    12. Bellido, Héctor & Molina, José Alberto & Solaz, Anne & Stancanelli, Elena, 2016. "Do children of the first marriage deter divorce?," Economic Modelling, Elsevier, vol. 55(C), pages 15-31.
    13. José Molina, 2013. "Altruism in the household: in kind transfers in the context of kin selection," Review of Economics of the Household, Springer, vol. 11(3), pages 309-312, September.
    14. J. Gimenez-Nadal & Jose Molina, 2013. "Parents’ education as a determinant of educational childcare time," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(2), pages 719-749, April.
    15. José Alberto Molina, 1997. "Two-stage Budgeting as an Economic Decision-making Process for Spanish Consumers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(1), pages 27-31.
    16. Inmaculada Garcia & Jose Alberto Molina & Victor Manuel Montuenga, 2010. "Intra-family distribution of paid-work time," Applied Economics, Taylor & Francis Journals, vol. 42(5), pages 589-601.
    17. José Molina, 2014. "Altruism and monetary transfers in the household: inter- and intra-generation issues," Review of Economics of the Household, Springer, vol. 12(3), pages 407-410, September.
    18. José Molina & Víctor Montuenga, 2009. "The Motherhood Wage Penalty in Spain," Journal of Family and Economic Issues, Springer, vol. 30(3), pages 237-251, September.
    19. J. Ignacio Gimenez-Nadal & José Alberto Molina, 2016. "Commuting Time And Household Responsibilities: Evidence Using Propensity Score Matching," Journal of Regional Science, Wiley Blackwell, vol. 56(2), pages 332-359, March.
    20. Inmaculada García-Mainar & José Alberto Molina & Víctor M. Montuenga, 2011. "Gender Differences in Childcare: Time Allocation in Five European Countries," Feminist Economics, Taylor & Francis Journals, vol. 17(1), pages 119-150, January.
    21. Inmaculada García & José Molina & María Navarro, 2007. "How Satisfied are Spouses with their Leisure Time? Evidence from Europe," Journal of Family and Economic Issues, Springer, vol. 28(4), pages 546-565, December.
    22. Altonji, Joseph G, 1986. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 176-215, June.
    23. Inmaculada Garcia & Jose-Alberto Molina & Maria Navarro, 2010. "The effects of education on spouses' satisfaction in Europe," Applied Economics, Taylor & Francis Journals, vol. 42(28), pages 3607-3618.
    24. Molina, José Alberto & Gimenez-Nadal, J. Ignacio & Cuesta, José A. & Garcia-Lazaro, Carlos & Moreno, Yamir & Sanchez, Angel, 2013. "Gender Differences in Cooperation: Experimental Evidence on High School Students," IZA Discussion Papers 7421, Institute of Labor Economics (IZA).
    25. J. Ignacio Gimenez-Nadal & José Alberto Molina & Yu Zhu, 2018. "Intergenerational mobility of housework time in the United Kingdom," Review of Economics of the Household, Springer, vol. 16(4), pages 911-937, December.
    26. Héctor Bellido & Miriam Marcén & José Alberto Molina, 2016. "The Effect of Culture on Fertility Behavior of US Teen Mothers," Feminist Economics, Taylor & Francis Journals, vol. 22(3), pages 101-126, July.
    27. repec:ebl:ecbull:v:4:y:2007:i:10:p:1-5 is not listed on IDEAS
    28. repec:ebl:ecbull:v:3:y:2007:i:39:p:1-7 is not listed on IDEAS
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    Cited by:

    1. Bravo, Yolanda & Rodrigo, Alejandro, 2019. "Analysis of demand characteristics for transport and communication in Spain from 1980 to 2015," MPRA Paper 94055, University Library of Munich, Germany.

    More about this item

    Keywords

    Demand analysis; Substitution Effect; Profit Function in Consumption; Marshallian; Hicksian and Frischian demand functions;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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