Local analysis ◆ Hicksian Separability Divide the consumption bundle into two sub-bundles x=(x, z), and price p=(,p, The prices of z are change homogenously p,=tp Choice:(x", zEmax u(x, z)st. px+tpz=w x-Z Let poz=w then x emax u(x, t)st. px+tw=w so u(x, z=u(x, t)=(w-t)+o(x)=m+o(x=u(x, m)Local analysis Hicksian Separability ◼ Divide the consumption bundle into two sub-bundles , and price ◼ The prices of z are change homogenously ◼ Choice: ◼ Let then ◼ so x z = ( , ) x = ( , ) p p pz 0 = t p p z , ( , ) max ( , ) . . x x u x s t px t w    + = 0 z z z p z p z0 = wz max ( , ) . . z x x u x t s t px tw w   + = ( , ) ( , ) ( ) ( ) ( ) ( , ) z u x u x t w tw x m x u x m z = = − + = + =  