What effect does a compensated price change have on a consumer's well-being?
A) The consumer's well-being increases.
B) The consumer's well-being decreases.
C) The consumer's well-being is unaffected.
D) The effect on the consumer's well-being cannot be determined without knowing the direction of the price change.

Question

Quizplus · Accepted Answer

A compensated price change refers to a theoretical situation where the price of a good changes, but the consumer's purchasing power is adjusted (compensated) so that they can still afford the same bundle of goods as before the price change. This means the consumer's well-being, in terms of their ability to purchase goods, remains unaffected.

What Effect Does a Compensated Price Change Have on a Consumer's