Equivalent variation means
A) finding an equivalent change in income that puts a person on the same utility as a change in price would.
B) finding equal tax rates that insure quantity demanded does not change.
C) equalizing excess burden across all markets.
D) moving the same distance in either direction from a starting point on an indifference curve.

Question

Quizplus · Accepted Answer

The definition of equivalent variation is finding an amount of income that would generate the same level of utility after a change in price. This means that the individual's overall utility is the same as it was before the price change. Options B and C are not related to the concept of equivalent variation. Option D describes the concept of marginal rate of substitution.

Equivalent Variation Means