Final answer:
The Equivalent Variation for the consumer when the price of the single good they purchase rises from $2 to $5, and they initially spend their entire income of $10 on it, is $10.
Step-by-step explanation:
The Equivalent Variation (EV) measures the change in income that would have the same effect on consumer welfare as a change in price, while allowing the consumer to reach the initial level of utility. When the price of a good rises from $2 to $5, the consumer can no longer afford the same quantity of the good with their fixed income of $10. If we assume the consumer spent all their money on this good, initially, they could purchase 5 units at $2 each. After the price increase, they can only afford 2 units at $5 each. The EV is the amount of money that would need to be taken away from the consumer to equate the utility lost from the price increase while still being able to buy 5 units at the new price.
Calculating the EV, we find that at the new price of $5, to afford the original 5 units, the consumer would need $25. Since the consumer only has $10, the EV would be the difference needed to reach the $25, which is $15. However, because the consumer's income does not change, and they would choose to spend all their income on the good, the EV in this situation is simply the difference in expenditure to buy the original amount, therefore $10.