ECON 2310 Chapter Notes - Chapter 6: Economic Surplus

45 views2 pages

Document Summary

6. 1 dissecting the effects of a price change. When the price of a good increases . The good becomes more expensive relative to all other goods. Consumers purchasing power declines b/c dollar doesn"t go as far anymore. Uncompensated price change: consists of a price change with bi change in income. Compensated price change: consists of a price change & an income change which together leave the consumer"s well-being unaffected (one cancels out the other) Effect of a compensated price change = the effect of an uncompensated price change + effect of providing compensation. Substitution effect of a price change: the effect on consumption of a compensated price change. Effect of an uncompensated price change = the effect of a compensated price change + effect of removing compensation. Income effect of a price change: the effect on consumption of removing the compensation after creating a compensated price change.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents