Own price effects and consumer welfare Flashcards
1
Q
Compensated demand curves:
A
Only involve substitution effect
2
Q
Ordinary demand curves include:
A
Substitution and income effect
3
Q
What is consumer surplus on a diagram?
A
The ares under the demand curve, above the price
4
Q
What is compensating variation?
A
The change in income that a consumer would need to restore their original utility
5
Q
What is Equivalent variation?
A
The change in income that would provide an equivalent change to the consumer’s utility
