Compensated Variation:

The compensated variation is a measure of the change in economic welfare that occurs when there is a change in prices or income. It represents the amount of money necessary to compensate an individual for the loss of welfare caused by a price or income change.

The Formula:
The formula for calculating the compensated variation is as follows:

Compensated Variation = Initial Utility - New Utility

Where:
- Initial Utility refers to the utility level before the price or income change.
- New Utility refers to the utility level after the price or income change.

Equivalent Variation:

The equivalent variation is another measure of the change in economic welfare resulting from a price or income change. It represents the amount of money necessary to restore an individual's welfare to its initial level after the change.

The Formula:
The formula for calculating the equivalent variation is as follows:

Equivalent Variation = New Utility - Initial Utility

Where:
- New Utility refers to the utility level after the price or income change.
- Initial Utility refers to the utility level before the price or income change.

Consumer Surplus:

Consumer surplus is a measure of the economic benefit that consumers receive when they are able to purchase goods or services at a price lower than what they are willing to pay. It represents the difference between the maximum price a consumer is willing to pay and the actual price they pay.

The Formula:
The formula for calculating consumer surplus depends on the demand function and the actual price. However, in general terms, it can be calculated as follows:

Consumer Surplus = Maximum Willingness to Pay - Actual Price

Where:
- Maximum Willingness to Pay refers to the highest price a consumer is willing to pay for a good or service.
- Actual Price refers to the price the consumer actually pays for the good or service.

Summary:
- Compensated variation is the change in welfare due to a price or income change, calculated as the difference between initial and new utility levels.
- Equivalent variation is the amount of money needed to restore welfare to its initial level after a price or income change, calculated as the difference between new and initial utility levels.
- Consumer surplus is the economic benefit consumers receive when they pay less than their maximum willingness to pay, calculated as the difference between the maximum willingness to pay and the actual price.