Illustrating consumer theory with the CES utility function

The authors use Microsoft Excel to derive compensated and uncompensated demand curves. They use a constant elasticity of substitution (CES) utility function to show how changes in a good's price or income affect the quantities demanded of that good and of the other composite good, using Excel's Solver. They provide three contributions. First, they provide an explicit connection between the form of the utility function and the graphical presentation of the indifference curves, budget constraints, and demand curves. Second, they make available a hands-on method of connecting utility functions to demand curves. Third, by relaxing the common Cobb-Douglas formulation, they allow a priceconsumption curve (price-expansion path) that is not horizontal (alternatively, an uncompensated demand curve with nonunitary elasticity).