This paper presents a decomposition of the total effect of a change in a quantity constraint on the money income constant conditional demand function into an income compensated substitution effect and a pure income effect. The substitution effect is shown to be equivalent to the Hicks substitute-complement relation while the income effect is shown to depend directly on the extent of over- or under-supply of the constrained good. The Tobin-Houthakker results on rationing constraints can be generalized in an intuitive manner to cases of non-optimal values of the constraint when the two goods involved are: (1) Hicks substitutes, the constrained good is over-supplied and the unconstrained good is a normal good; or, (2) Hicks complements, the constrained good is under-supplied and the unconstrained good is a normal good. In the case of substitutes and under-supply or complements and over-supply, the sign of the Hicks substicute-complement relation is not sufficient to determine the sign of the partial derivative of interest. Several applications of the theoretical results are also presented.

Some of the most fundamental assumptions of economics are utility maximization and weak separability of the arguments in the represen tative consumer's utility function. This paper contains results from nonparametric tests of these assumptions about consumer behavior. The authors find that quarterly per capita data on consumption goods, le isure, and monetary assets are consistent with utility maximization. Further, consumption goods and leisure meet necessary and sufficient conditions for weak separability. Additionally, one grouping of relat ively liquid monetary assets meets the necessary conditions for weak separability. They also test and find no evidence of homothetic prefe rences.