| Summary: | The traditional Hicks-Allen theory was presented and modified
by (1) formulating the consumer's budget constraint with a weak
inequality, (2) deriving the Slutsky equation in matrix notation and
(3) demonstrating that the income and substitution effects could be
derived directly from the partial derivatives of the consumer's
demand functions. Two examples of human behavior in the commodity
markets were presented, which refute the Hicks-Allen theory. Conceptualizing
these examples and similar ones into an economic theory
of consumer behavior was the objective of the inquiry.
The Hicks-Allen concept of the consumer's utility function was
modified by including a set of variables to represent the state of the
consumer's environment, These variables were then constrained to
imposed levels which were assumed beyond detectable influence by the
individual consumer. The traditional problems of (1) determining
the consumer's optimal budget, (2) determining the rates at which
the consumer adjusts his purchases in response to the determinants
of his demands, (3) classifying commodities and inter-commodity
relationships, were re-examined. The results were: (1) The consumer's
demand functions contain a set of variables representing the
imposed state of his environment, (2) The consumer's rates of adjusting
his optimal purchases contain additional influences in response to
changes in the imposed state of his environment, and (3) An economic
classification was proposed for the components of the consumer's
environment.
To demonstrate the proposed modification a numerical example
was given depicting a consumer choosing his optimal budget in a two
commodity market contained in a one dimensional environment. The
proposed modification was subjected to critical scrutiny and its
testability was discussed. Two classes of problems, (a) relating the
individual's decisions of how much or how he will utilize any portion
of his environment, and (b) determining any economic value for the
environment, are not rendered intelligible or comprehensible with the
proposed modification. Two classes of problems for further inquiry
were suggested, (a) metaphysical problems of demarcating an individual's
consumption and his use of an item from his environment,
and (b) reformulating the theory of production and the theory of
equilibrium price determination along the same lines as the proposed
modification. The proposed modification of the Hicks-Allen theory
and the method used to analyze the effects of this modification represent
the contributions made by this inquiry. === Graduation date: 1970
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