Following the weak axiom of revealed preference (WARP), developed by Varian
, a money-metric expenditure function is derived for a CES utility function
in this paper. Using the US aggregate data on consumption used by Varian,
the money-metric expenditure function is estimated to calculate an efficien
cy index measuring the magnitude of departure from the optimum expenditures
. The results are then compared to those reported by Varian for a Cobb-Doug
las utility function. The findings point to a sizeable bias in the calculat
ed efficiency index in the near-optimization analysis as determined by the
choice of the functional form.