Question

Explain compensating variation in income. Using the variation distinguish between income and substitution effects of a fall in price of a commodity with the help of indifference curve techniques in case of following: ● Normal Good ● Giffen Good​

Answer 1

compensating variation, is the adjustment in income that returns the consumer to the original utility after an economic change has occurred. ... EV, or equivalent variation is the adjustment in income that changes the consumer's utility equal to the level that would occur IF the event had happened.