The inconsistency of which one of the following criteria is labelled as Scitovsky Paradox?
A Kaldor–Hicks compensation test can approve a change and also approve its reversal when evaluated from the new distribution, producing the Scitovsky reversal paradox.…
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The inconsistency of which one of the following criteria is labelled as Scitovsky Paradox?
Answer and explanation
Correct answer D
A Kaldor–Hicks compensation test can approve a change and also approve its reversal when evaluated from the new distribution, producing the Scitovsky reversal paradox. Little’s criterion, Pareto improvement and the Bergson social-welfare formulation are not the compensation criterion generating that particular reversal.
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UGC NET Economics