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Gains From Trade

Consumer Surplus

Quantifying Welfare E ects

Producer Surplus

Welfare in Equilibrium

Equivalence Under Quasilinear Utility

1 v(c ) + m

1 pc

=

v(c ) + (m + CV )

1 pc

|{

}

|{

}

CV is the amount of money such that

before change

CV =

after change with compensation

v ( c 1 ) v ( c 1 ) + p c 1

p c 1

1 v(c ) + (m

EV )

1 pc

=

v(c ) + m

1 pc

|{

}

|{

}

EV is the amount of money such that

before change with

CV = EV

V

EV =

after change

v ( c 1 ) v ( c 1 ) + p c 1

p c 1

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