Often economists measure the loss in consumer surplus by looking at the changing area below the Marshallian demand curve. This approach will provide a more accurate measure of the compensating variation of such a price increase if:
a. the good occupies a small portion of a person's budget
b. the good occupies a large portion of a person's budget.
c. the good has many close substitutes.
d. the good has few substitutes.
a
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Your wage this year is $15 per hour and the CPI is 178. Next year you get a raise to $17 and the CPI rises to 185. What has happened?
A) Your real and nominal wages have each increased by the same percentage. B) Your real wage has increased but by a smaller percentage than your nominal wage. C) Your nominal wage has increased but your real wage has declined. D) Your nominal wage has increased but your real wage has not changed. E) Your real wage rate has increased by a larger percentage than your nominal wage.
Pakistan has developed a comparative advantage in the production of clothing. The source of its comparative advantage in this product is
A) a favorable climate. B) abundant supplies of natural resources. C) a large supply of unskilled workers. D) technology.