Marshallian and Hicksian demands

Marshallian and Hicksian demands stem from two ways of looking at the same problem- how
to obtain the utility we crave with the budget we have. Consumption duality expresses this
problem as two sides of the same coin: keeping our budget fixed and maximising utility
(primal demand, which leads us to Marshallian demand curves) or setting a target level of
utility and minimising the cost associated with it (dual demand, which gives us Hicksian
demand curves). We must also look at the Lagrangian functions where we obtain the first

This leads us to the main difference between the two types of demand: Marshallian demand
curves (demand curve yang biasa) simply show the relationship between the price of a good
and the quantity demanded of it. Hicksian demand curves show the relationship between the
price of a good and the quantity demanded of it assuming that the prices of other goods and
our level of utility remain constant (sticky). This makes sense when we look at consumption
duality: for dual (Hicksian) demand, we maintain a fixed level of utility, and so our level of
wealth, or income, must remain constant. We simply cannot be as satisfied if we do not
maintain equal purchasing power.
Marshallian and Hicksian demand curves meet where the quantity demanded is equal for both
sides of the consumer choice problem (maximising utility or minimising cost). For prices
above this equilibrium point, consumer wealth is higher with Hicksian demand curves than
Marshallian demand curves, because to maintain utility constant, Hicksian demand curves
assume real wealth remains unchanged. Marshallian demand assumes only nominal wealth

remains equal. The opposite is true for prices below this point: Marshallian demand assumes
that as nominal wealth remains the same but price levels drop (negative inflation), the
consumer is better off. Hicksian demand assumes real wealth is constant, so the individual is
worse off. This is why Marshallian demand curves are more stable: they reflect both rent
effect and substitution effect. Hicksian demand curves only show substitution effects (utility
is constant, therefore rent must remain constant), which means that demand varies with price
only because other options become more attractive.
Formally,