Homothetic preferences guarantee that the expenditure function implies linear homogeneity in wealth.
Is it true that homothetic preferences guarantee that the expenditure function implies linear homogeneity in wealth?
This statement is a standard microeconomic definition regarding consumer theory and homothetic preferences; no citation is needed as it is a direct mathematical implication.
Verdict: COMMON KNOWLEDGE · 0 sources for, 0 against · Last checked
The claim represents a standard, foundational property in microeconomic consumer theory. By definition, if preferences are homothetic (meaning the marginal rate of substitution depends only on the ratio of consumption quantities, not their absolute levels), the indirect utility function is multiplicative in income/wealth and price indices, which yields an expenditure function that is linear (homogeneous of degree one) in wealth or utility. Because this is a textbook mathematical property of utility maximization and duality, it is common knowledge in economics and does not require empirical citations from the retrieved literature.
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The claim represents a standard, foundational property in microeconomic consumer theory. By definition, if preferences are homothetic (meaning the marginal rate of substitution depends only on the ratio of consumption quantities, not their absolute levels), the indirect utility function is multiplicative in income/wealth and price indices, which yields an expenditure function that is linear (homogeneous of degree one) in wealth or utility. Because this is a textbook mathematical property of utility maximization and duality, it is common knowledge in economics and does not require empirical citations from the retrieved literature.
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