Env Econ Sg1

1. Analytical Tools (a review of micro principles) => Static TC TC(Both) DYNAMIC TB Purchase TB where indifference curve is Income/ Income/ Income/ P 60 PS 1 oQ(e) 2D1Producer D2Variable 300 S tangent DProduce Q to budget where P2 60 CS D 300 Inverse Demand P(e) P1 constraint. P(e) Q(e1) Q(e) Costs 60 Not produced. (Dead Atatweight P1 Supply lossisat Q(e1) =Curve: D S PX1Q2 Q(e) PX3 P(e) =P(e) 30 59 Q1; WTA>WTP Q1 58 P(e) Q(e) D Demand S Q(d(x)) 300 –Costs 5P D = D1 + D2 o PX2 difference is greatest. Total WTA: Total Includes PS includes the variable Fixed costs + of Profit all=firms Surplus P(x) = 60 – 0.20Q WTP = (1/2)(60)(300) WTP = (1/2)(60-30)(150) = 9000 + (30)(150) 6750 S1 (MD>0) greater than Demand -willing at Q2; WTA<WTP *Ordinary Demand Curve Q(e) = 150 300 o MC to produce Q(e). S =D = MB of MC(priv.) CS PSis(Surplus). +the Opp. Costsis =the Total WTP *This *This dollar value received p Q1 D =+ MB(private) MC(priv.) psSum S2 (MG>0) At P2total 5WTP @ 150 units 7 Q0 cs Q0 Q1MC(soc.) MC(soc.) MC(priv.) o by the consumers of this Supply is less thangood. Welfare = CS + PS Variable costs of production (opp. costs) Total WTP = 6750  Demand- (Shortage). Total Expenditure = 30 X 150 = 4500 o

- Consumer Surplus = 6750-4500 = 2250 *Consumer surplus is the total utility received above and beyond what consumers were willing to pay.