CV and EV are equal when:
A)the substitution effect is negative.
B)when the income effect is non- zero.
C)they equal the change in consumer's surplus.
D)both A and B are correct

Question

Quizplus · Accepted Answer

CV and EV are equal when they equal the change in consumer's surplus, which means that the value the consumer places on a good or service is equal to the amount they are willing to pay. This occurs when the consumer is willing to pay the market price for the good or service, which means that the demand curve intersects the price line at the market equilibrium. The substitution and income effects may have an impact on the consumer's willingness to pay, but they do not directly determine whether CV and EV are equal.

CV and EV Are Equal When