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lecture7 - welfare - handout

lecture7 - welfare - handout - Topic 4 Consumer Choice(3...

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2/1/2009 1 Topic 4: Consumer Choice (3) USC Marshall From demand to welfare From demand to welfare Having discussed how demand is formed, we can discuss how changes in market conditions affect consumer welfare But if levels of utility have no meaning, how can USC Marshall we talk about welfare? – We can still analyze: • Whether a consumer is better off or worse off • What would it take to make a consumer as well off as before a change From demand to welfare How can we evaluate consumer welfare? – From consumer preferences • Compensating variation – From demand curves • Consumer surplus USC Marshall –Compensated and uncompensated demand curves – From the evolution of prices • Price indices
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