A measure of how much income must be given to a consumer after a price change to leave the consumer at the same level of utility the consumer had attained before the price change occurred is called
A) opportunity cost
B) price-compensating variation in income
C) the Slutsky equation

Question

Quizplus · Accepted Answer

Price-compensating variation in income measures the change in income necessary to offset the effects of a price change and keep the consumer at the same level of utility. The Slutsky equation is a tool used to decompose the effects of a price change on the quantity demanded of a good into an income effect and a substitution effect. Opportunity cost is the cost of forgoing the next best alternative when making a choice.

A Measure of How Much Income Must Be Given to a Consumer