The amount of money one would have to give to a consumer to offset the harm from a price increase is called
A) compensating variation.
B) structured settlement.
C) equivalent variation.
D) consumer surplus.

Question

Quizplus · Accepted Answer

Compensating variation is the amount of money that would need to be given to a consumer to offset the harm caused by a price increase. This is calculated as the difference between the consumer's utility level before and after the price increase, held constant by giving them the necessary amount of money. This measure helps economists understand the welfare effects of price changes on consumers. Options B, C, and D are not applicable in this context.

The Amount of Money One Would Have to Give to a Consumer