Chapter 10: Consumer’s surplus

Question 1

Quasilinear utility

Answer 1

is an arbitrary function. In the case of two goods this function could be, for example, The quasilinear form is special in that the demand functions for all but one of the consumption goods depend only on the prices and not on the income.

Question 2

compensating variation (CV)

Answer 2

The compensating variation (CV) measures the change in income necessary
to restore the consumer to his initial indifference curve.

Question 3

The equivalent variation (EV)

Answer 3

The equivalent variation (EV) measures how much money would have to be
taken away from the consumer before the price change to leave him as well off
as he would be after the price change.

Question 4

gross consumer’s surplus

Answer 4

The utility from consuming n units of the discrete good is the area of the first n bars which make up the demand function