Re: income and substitution effect

[Alex T Tabarrok]

So far we have that i. and s. effects are useful to

a) teach Marshallian demand
b) teach difference between nominal and real income
c) students going on to graduate school
d) useful but for reasons that can't be remembered! :)
e) useful as a hurdle/signal
f) not useful at the intermediate/mba level

Regarding Marshallian demand this is true but just raises the question what is the use of Marshallian demand at an intermediate level? (Note almost all textbooks discuss i. and s. effects but most do not teach M. demand.) As I said in my post, for welfare analysis, income and substitution effects become important but this is not taught at the I. level.

I don't see how i. and s. effects teach nominal and real income but am willing to be enlightened.

c) is possible but it means that teaching i. and s. effects is a waste for most students.

Surely there are enough useful things to teach that are also difficult? thus i. and s. effects is not needed for the hurdle.

Thus the bulk of the posts, and a number I have received offlist, increase in my mind the hypothesis that this material is a waste of time (relative to other things that could be taught).


Alex

--
Alexander Tabarrok Department of Economics, MSN 1D3 George Mason University Fairfax, VA, 22030 Tel. 703-993-2314

Web Page: http://mason.gmu.edu/~atabarro/
and
Director of Research The Independent Institute 100 Swan Way Oakland, CA, 94621 Tel. 510-632-1366