Without doing any math, or drawing a graph, which is bigger, compensating variation or equivalent variation for a tax?
Without doing any math, or drawing a graph, which is bigger, compensating variation or equivalent variation for a tax? Consider an individual with Cobb-Douglas preferences over some good and all other goods. In what sense is consumer surplus a reasonable approximation of the negative impact of a price change on the individual? Explain how you know, making sure to define each of these types of variation.
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