Jules Dupuit used an early version of this concept in deciding the tolls for bridges. John Hicks created alternatives to it after showing it does not take into account income effects. One of those alternatives considers the sum necessary to compensate someone after a price change. When utility is qu
Jules Dupuit used an early version of this concept in deciding the tolls for bridges. John Hicks created alternatives to it after showing it does not take into account income effects. One of those alternatives considers the sum necessary to compensate someone after a price change. When utility is quasilinear, the compensating variation and equivalent variation are equal to this. Firms may use price discrimination to capture all of this quantity without creating deadweight loss. The gross type for a discrete good is the sum of the reservation prices for each good consumed, and the net type is generally the area between the price and the demand curve. For 10 points, name this difference between what people are willing to pay and the actual price.