<p>Hicks compensation ensures that the consumer will reach the same utility level after the price/wealth change. (So graphically will be on the same IC)</p>

<p>Slutsky compensation ensure that the consumer can afford the old bundle after the price/wealth change. (so graphically rotates around the old bundle)</p>

<p>So when working out a problem, you can spot the difference when the consumer either has the same utility level, or can afford the same bundle. </p>

CC BY-SA 3.0
2016-09-20T23:40:07.237Z
2016-09-20T23:40:07.237Z
VCG
<p>Level: Ungrad, Micro</p>

<p>I have a task, <a href="https://i.sstatic.net/EUvoD.jpg" rel="nofollow noreferrer">https://i.sstatic.net/EUvoD.jpg</a> I have done some questions. While I can't understand the differences between Slutsky and Hicks approach. I get it theoreticaly, but I don't know what differences would appear during solution. Please help with substitution-income effect calculation.</p>

<p>P.S. I have calculated substitution effect somehow, but I'm not sure wich approach that would be.</p>

<p>Any help is appreciated.</p>

<microeconomics><utility>
Slutsky and Hicks approach in calculating SE, IE. Differences and interpretation
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# Slutsky and Hicks approach in calculating SE, IE. Differences and interpretation

(Asked by: username_0 on 2016-09-20)

Level: Ungrad, Micro

I have a task, <https://i.sstatic.net/EUvoD.jpg> I have done some questions. While I can't understand the differences between Slutsky and Hicks approach. I get it theoreticaly, but I don't know what differences would appear during solution. Please help with substitution-income effect calculation.

P.S. I have calculated substitution effect somehow, but I'm not sure wich approach that would be.

Any help is appreciated.

**Tags:** microeconomics, utility

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## 1 answers

### Answer by username_1 on 2016-09-20. Score: 1 | Accepted answer

Hicks compensation ensures that the consumer will reach the same utility level after the price/wealth change. (So graphically will be on the same IC)

Slutsky compensation ensure that the consumer can afford the old bundle after the price/wealth change. (so graphically rotates around the old bundle)

So when working out a problem, you can spot the difference when the consumer either has the same utility level, or can afford the same bundle.


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