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Author Question: If a consumer is compensated for the income effect that occurs when the price of a good increases, ... (Read 62 times)

Alainaaa8

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on: Jul 1, 2018
If a consumer is compensated for the income effect that occurs when the price of a good increases, then his demand curves can never slope upward.
 
  Indicate whether the statement is true or false

Question 2

The amount of money one would have to take from a consumer to harm her by as much as the price increase is called
 
  A) compensating variation.
  B) structured settlement.
  C) equivalent variation.
  D) consumer surplus.
Microeconomics ¦ Perloff ¦ 8th Edition
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sultansheikh

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Reply #1 on: Jul 1, 2018
Answer to Question 1

True . The demand curve would only include the substitution effect. Even for Giffen goods, dq/dp is negative holding utility constant.

Answer to Question 2

C


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