We remove the income effect by compensating our consumer for the price increase by returning enough income, at the new higher price PR2 that she can exactly afford her original bundle. This would increase her income from IO to IC.

    It's very simple to compute this compensation amount. Let's call the additional income needed to compensate our consumer . It turns out that = (PR2 - PR1) x RO. So, for example, if the price of Ramen went from $1.00 to $1.50 and she was originally buying 20 packets, , her compensation, would be ($1.50 - $1.00) x 20 = $10.

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