Denoted as EV.
Equivalent variation is the income change instead of price change, but has the same effect on consumer utility as price change.
- 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
page revision: 9, last edited: 25 Apr 2009 03:46