Welfare variations and the comparative statics of demand

By employing order-theoretic comparative statics, we provide necessary and sufficient conditions on the direct utility function (alternatively, on the indirect utility function) to guarantee that the compensating and equivalent variations are monotonically increasing in income. We also show that these conditions are sufficient to guarantee normal demand. Our results do not depend on the smoothness or strict quasiconcavity of the utility function, and can be extended to a setting with non-linear prices. Copyright Springer-Verlag 2013