Local analysis ◆ Hicksian Separability Divide the consumption bundle into two sub-bundles x=(x, z), and price p=(p,p, The prices of z are change homogenously P2= ■ Choice:(x,z)∈maxl(x,z)st.px+p0z=1 Let poz= then x emax u(x, t)st. px+tu Sol(x,2)=l(x,D=(-n)+(x)=m+(x)=l(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 = = − + = + =  