Equivalent variation is negative if the price and income change would make the consumer worse off. Compensating variation is negative of the amount of money the consumer would be just willing to accept from the planner to allow the price change to take place.

Is compensating variation positive?

In this case the compensating variation is negative – the individual needs to give away money to compensate for the fact that he or she is better off than before.]

How do you interpret compensating variation?

If the transfer amount is known, then its size can be interpreted as being proportional to the magnitude of the welfare change. CV, or compensating variation, is the adjustment in income that returns the consumer to the original utility after an economic change has occurred.