There is no elasticity of substitution that is inconsistent with tastes being homothetic.

Question

Quizplus · Accepted Answer

Tastes being homothetic means that the consumer's relative preferences for goods remain constant as income changes. The elasticity of substitution measures how much the consumer substitutes one good for another when their relative prices change. These two concepts are compatible and not inherently contradictory. Therefore, it is possible for any elasticity of substitution to be consistent with homothetic preferences.

There Is No Elasticity of Substitution That Is Inconsistent with Tastes