ABSTRACT
The emphasis of the analysis of the previous chapter was primarily on the individual’s response to changes in price and income variables. In this chapter we will be more concerned with the effects of such changes on the individual’s utility. Whilst the discussion is fairly technical in places, it does have practical implications, because from a policy viewpoint it is often desirable to know whether an individual is better or worse off as a result of any changes that might be contemplated and, when comparing different changes, by how much. If utility was something that could be measured in well-defined cardinal units, all this would create no serious problems. In the absence of such units, however, we are driven to seek indirect measures of utility changes. In this chapter we consider some that have been suggested on the basis of the standard analysis of consumer’s choice developed in previous chapters.
