Equivalent Variation
equivalent_variation.svg

Denoted as EV.

Equivalent variation is the income change instead of price change, but has the same effect on consumer utility as price change.

Note

  • In the graph, we only know that X decrease; for Y, since we don't know which is larger between income effect and substitution effect, we can't judge Y's movement.
  • If Y denotes money, EV=Y1-Y2

See also

Indifference curve relative concepts
Compensating Variation

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