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Define the concepts of compensating variation and equivalent variation. In class, we noticed that our compensating variation and equivalent variation of the same policy might

Define the concepts of compensating variation and equivalent variation. In class, we noticed that our compensating variation and equivalent variation of the same policy might be different amounts o f money. We also showed this fact in an indifference curve diagram. Now we want to show that this is also true for a generic consum er with utility U(x,y)= xy and budget M

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