### Abstract

Original language | English |
---|---|

Pages (from-to) | 511-523 |

Number of pages | 13 |

Journal | Economic Journal |

Volume | 88 |

Issue number | 351 |

DOIs | |

Publication status | Published - 1 Sep 1978 |

Externally published | Yes |

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### Cite this

*Economic Journal*,

*88*(351), 511-523. https://doi.org/10.2307/2232050

}

*Economic Journal*, vol. 88, no. 351, pp. 511-523. https://doi.org/10.2307/2232050

**Consumer's surplus and linearity of Engel curves.** / SEADE, Jesús.

Research output: Journal Publications › Journal Article (refereed)

TY - JOUR

T1 - Consumer's surplus and linearity of Engel curves

AU - SEADE, Jesús

PY - 1978/9/1

Y1 - 1978/9/1

N2 - We have seen in this paper how the linear Engel curves (LEC) assumption alone takes us a long way in rendering rigorous surplus analysis manageable in terms of observables, while at the same time removing, for the LEC case, some serious clouds one associates with the consumer's surplus problem or literature. Our main results were (i) the fundamental equation (9) governing the behaviour imposed by utility maximisation upon the marginal utility of income, as well as the explicit solution for this variable in the LEC case (equation (21); also footnote 2, p. 516); (ii) based on the previous result, we expressed Hicksian surplus in terms of observables directly (equations (25)--(23)); (iii) some simple rules of thumb were derived, strictly valid for more special, but central, cases (equations (24)--(25)) and finally (iv) some progress was made on the problem of aggregation of surpluses, replacing the perfectly homogenous consumers required for the general case, by the condition that Engel curves be equal or at least parallel across consumers, who can otherwise have any different incomes. In particular, the assumption allows different commodities to be present in the model, from luxuries down to inferior goods as far as income dependence is concerned, and with no special restrictions on their dependence on prices.

AB - We have seen in this paper how the linear Engel curves (LEC) assumption alone takes us a long way in rendering rigorous surplus analysis manageable in terms of observables, while at the same time removing, for the LEC case, some serious clouds one associates with the consumer's surplus problem or literature. Our main results were (i) the fundamental equation (9) governing the behaviour imposed by utility maximisation upon the marginal utility of income, as well as the explicit solution for this variable in the LEC case (equation (21); also footnote 2, p. 516); (ii) based on the previous result, we expressed Hicksian surplus in terms of observables directly (equations (25)--(23)); (iii) some simple rules of thumb were derived, strictly valid for more special, but central, cases (equations (24)--(25)) and finally (iv) some progress was made on the problem of aggregation of surpluses, replacing the perfectly homogenous consumers required for the general case, by the condition that Engel curves be equal or at least parallel across consumers, who can otherwise have any different incomes. In particular, the assumption allows different commodities to be present in the model, from luxuries down to inferior goods as far as income dependence is concerned, and with no special restrictions on their dependence on prices.

UR - http://commons.ln.edu.hk/sw_master/3147

U2 - 10.2307/2232050

DO - 10.2307/2232050

M3 - Journal Article (refereed)

VL - 88

SP - 511

EP - 523

JO - Economic Journal

JF - Economic Journal

SN - 0013-0133

IS - 351

ER -