Wat is the difference between equivalent variation and compensated variation?

Question

Wat is the difference between equivalent variation and compensated variation?

Answer 1

correct

Answer 2

Assuming a world with 2 goods, X and Y.

Let us consider a rise in price of good X.

Next, let's suppose the Government decides to compensate the individual the loss in welfare,

CV = Hicksian

It means the amount required to compensate individuals such that the net utility would be unchange.

EV = Slutsky

It means the amount required to compensate individuals to allow him to consume the original bundle forgone.