Hicksian

Hicksian is an adjective relating to the British economist Sir John Hicks (1904–1989) or to theoretical constructs named after him in microeconomics. In consumer theory, Hicksian demand, also known as compensated demand, is the quantity of a good a consumer would choose when prices change but the consumer’s level of utility is kept constant. It is derived from an expenditure-minimization problem: given prices and a target utility, the consumer minimizes expenditure to reach that utility, yielding the Hicksian demand function h_i(p,u). Unlike Marshallian (uncompensated) demand, which depends on income as well as prices, Hicksian demand reflects substitution effects alone.

The concept is used to separate substitution effects from income effects when prices change. The total effect of a price change on actual purchases (the Marshallian demand) can be decomposed into a substitution effect, described by the Hicksian demand, and an income effect arising from the change in purchasing power. This relationship is often discussed in the context of the Slutsky decomposition, which links Hicksian and Marshallian demands.

Hicks’s work and the resulting Hicksian concepts are central to welfare economics, demand analysis, and price elasticity studies. John Hicks contributed to general equilibrium theory and the development of modern microeconomic theory; his name is attached to several results and methods, including compensated demand analysis and the Slutsky decomposition. In practice, the term Hicksian is most frequently encountered in the context of consumer demand and elasticity research, and as a descriptor for theories and models associated with Hicks.