Abstract:<p>The Slutsky decomposition is a mathematical formula which has been used for a very long time in economics to analyze how the demand for a good changes when its price goes up. Such a change in the demand is called the price effect. Most people will expect a decrease in the demand in response to a rise in the price. In other words, they will have a downward sloping demand curve in mind. Indeed they are right in usual cases.In terms of economicsit is said that the price effect is usually negative. But wh… Show more
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