Abstract
Over the years, consumer surplus has been used to measure the welfare effects of price and income changes. Despite its widespread use, it provides a measure of well-being that is ordinally equivalent to the change in utility only under conditions that are inconsistent with long-standing empirical evidence. Hicksian surplus measures, such as the equivalent or compensating variations, provide exact indicators of the change in utility without such restrictions. Beginning in the early 1980s, empirical methods have been developed to estimate the equivalent variation that has the same data requirements as consumer surplus.
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Slesnick, D.T. (2018). Consumer Surplus. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_626
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DOI: https://doi.org/10.1057/978-1-349-95189-5_626
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