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    Question

    Which method is used by Hicks to eliminate the income

    effect when price of a product is changed
    A Compensating variation in income Correct Answer Incorrect Answer
    B The cost difference Correct Answer Incorrect Answer
    C The over compensation effect Correct Answer Incorrect Answer
    D Substituting variation in price Correct Answer Incorrect Answer

    Solution

    Hicks has separated the substitution effect and the income effect from the price effect through compensating variation in income by changing the relative price of a good while keeping the real income of the consumer constant.

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