If there is Cobb-Douglas utility, compensating and equivalent variation are the same.

Question

Quizplus · Accepted Answer

In Cobb-Douglas utility, compensating and equivalent variation are generally not the same because they measure different concepts: compensating variation is the amount of money needed to reach the original utility after a price change, while equivalent variation is the amount needed to reach the new utility level before the price change.

If There Is Cobb-Douglas Utility, Compensating and Equivalent Variation Are