Answer to Question #57213 in Other Economics for matt
Compensating variation measures the amount of extra income that the individual would need at the new price to compensate for the adverse effects of the price change.
Equivalent variation measures the sum of money we would need to take away from the individual at the original price to reduce the individual's welfare by the same amount.
The change in consumer surplus is between the equivalent and compensating variations.
Need a fast expert's response?Submit order
and get a quick answer at the best price
for any assignment or question with DETAILED EXPLANATIONS!