consumer_surplus

# consumer_surplus - 9 C o n s u m e r s u r p l u s C h a n...

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Unformatted text preview: 9 C o n s u m e r s u r p l u s C h a n g e : ( p , m ) → ( p , m ) . W e l f a r e c h a n g e : ∆ W = v ( p , m ) − v ( p , m ) . P r o b l e m : v i s n o t a l w a y s o b s e r v e d ; ∆ W i s n o t i n \$ . 9 . 1 C o m p e n s a t i n g a n d e q u i v a l e n t v a r i a t i o n s M o n e y m e t r i c u t i l i t i e s : d i r e c t : m ( p , x ) = e ( p , u ( x ) ) , i n d i r e c t : µ ( p ; q , m ) = e ( p , v ( q , m ) ) . T h e n ∆ W = µ ( p ; p , m ) − µ ( p ; p , m ) , w h a t i s p ? O b v i o u s c h o i c e s : p = p o r p = p . T h u s , e q u i v a l e n t v a r i a t i o n a n d c o m p e n s a t i n g v a r i a t i o n a r e d e f n e d : E V = µ ( p ; p , m ) − µ ( p ; p , m ) = µ ( p ; p , m ) − m , C V = µ ( p ; p , m ) − µ ( p ; p , m ) = m − µ ( p ; p , m ) . C o m p a r e w i t h H i c k s i a n c o m p e n s a t i o n s . 9 . 2 C o n s u m e r s u r p l u s I f x ( p ) i s t h e d e m a n d ( n o t e s i n g l e d i m e n s i o n...
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## This note was uploaded on 03/18/2012 for the course ECON 201 taught by Professor Çakmak during the Spring '10 term at Middle East Technical University.

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consumer_surplus - 9 C o n s u m e r s u r p l u s C h a n...

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