Kisa consumes the same amount of cigarettes each week regardless of her income (assume that her income is sufficiently large such that the quantity is affordable).The Equivalent Variation equals the Compensating Variation.

Question

Quizplus · Accepted Answer

The difference between the measures lies with the income effect/elasticity.There is no income effect for Kisa therefore the measures will be the same.

Kisa Consumes the Same Amount of Cigarettes Each Week Regardless