What does compensating variation mean?
Definitions for compensating variation
com·pen·sat·ing vari·a·tion
This dictionary definitions page includes all the possible meanings, example usage and translations of the word compensating variation.
Wikidata
Compensating variation
In economics, compensating variation is a measure of utility change introduced by John Hicks. 'Compensating variation' refers to the amount of additional money an agent would need to reach its initial utility after a change in prices, or a change in product quality, or the introduction of new products. Compensating variation can be used to find the effect of a price change on an agent's net welfare. CV reflects new prices and the old utility level. It is often written using an expenditure function, e: where is the wealth level, and are the old and new prices respectively, and and are the old and new utility levels respectively. The first equation can be interpreted as saying that, under the new price regime, the consumer would accept CV in exchange for allowing the change to occur. More intuitively, the equation can be written using the value function, v: one of the equivalent definitions of the CV. Notice that in this second example the CV is computed from the point of view of the government, in this case the CV measures the tax the government has to give to the consumer in order to let him reach his old utility with the new system of prices. The only practical change is that the sign of the CV is changed. This change of perspective often occurs in order to have the same sign of the Equivalent variation.
Numerology
Chaldean Numerology
The numerical value of compensating variation in Chaldean Numerology is: 5
Pythagorean Numerology
The numerical value of compensating variation in Pythagorean Numerology is: 2
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"compensating variation." Definitions.net. STANDS4 LLC, 2024. Web. 25 Apr. 2024. <https://www.definitions.net/definition/compensating+variation>.
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