Abstract
Consumer’s surplus measures the area under the demand curve between two prices, but is path dependent. There exists a path such that consumer’s surplus tracks utility and an explicit formula is known for CES utilities. This paper shows that the CES based formula holds for any homothetic utility and I call it the consumer’s index. The index modifies consumer’s surplus in two ways: the change in income is measured by its growth factor and the area under the demand curve is normalized by income.
Original language | English |
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Pages (from-to) | 119-122 |
Number of pages | 4 |
Journal | International Journal of Economic Theory |
Volume | 9 |
Issue number | 29 |
DOIs | |
Publication status | Published - 2020 |
Keywords
- consumer’s surplus
- price–income indices
- purchasing power