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Questions › UoH › UoH 2012 › Q51
1 mark, −0.33Microeconomics › Demand theory and elasticity › Compensating and equivalent variationHardabout 2 min

UoH 2012 Question 51: Demand theory and elasticity

In general, for normal goods, the relationship between Compensating Variation in Income (CV), Equivalent variation in Income, (EV) and a change in Consumer Surplus (Δ\DeltaΔCS) for a price increase is given by,

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In general, for normal goods, the relationship between Compensating Variation in Income (CV), Equivalent variation in Income, (EV) and a change in Consumer Surplus (Δ CS) for a price increase is given by, (A) CV > EV > Δ CS (B) EV > Δ CS > CV (C) EV > CV > Δ CS (D) CV > Δ CS > EV

Also written as: In general, for normal goods, the relationship between Compensating Variation in Income (CV), Equivalent variation in Income, (EV) and a change in Consumer Surplus (Delta CS) for a price increase is given by,

Demand theory and elasticity has come up 161 times in 7 exams since 2004.

What this question tests

This question is on Compensating and equivalent variation, part of Demand theory and elasticity in Microeconomics.

Money measures of the welfare change from a price change.

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