Compensating Variation
compensating_variation.svg

Denoted as CV.

When price of one product rises, the amount of money should be given to the consumer to maintain his /her original utility level. This is why this concept is called compensated. When price drops, the word "compensating" becomes confusing.

If Y denotes money, CV=Y2-Y1

See also

Indifference curve relative concepts
Equivalent Variation

External links

http://wilcoxen.maxwell.insightworks.com/pages/307.html

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