The Compensation Variation and Equivalent Variation Will Be Closer to Each

question 41

Multiple Choice

The compensation variation and equivalent variation will be closer to each other when

• A)the income elasticity is greater.
• B)the budget share is greater.
• C)the price change is smaller.
• D)the income elasticity is smaller.

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Definitions:

Trade or Business

This refers to the regular and continuous operation of an activity with the purpose of earning income or profit.

Depreciation

An accounting method of allocating the cost of a tangible or physical asset over its useful life to account for declines in value.

Ordinary Assets

Assets that are held for sale in the ordinary course of a business or are otherwise not capital assets, including inventory and property used in a trade or business.

Inventory

Goods and materials held by a business for the purpose of sale or production.