Answer to Question #288232 in Microeconomics for Likenaw

Question

The Kaldor-Hicks-Scitovsky test says that a re-allocation is desirable if two conditions are satisfied. State these conditions and explain each condition by giving examples?

Answer 1

The two conditions for economic change are; the fulfillment test and the non-fulfillment of the reversal test.

For example moving from state B can better than state A, but once the society moves to the state B, the same criteria may reveal that the return move from B to A is also desirable on welfare grounds