Benefit-Cost Analysis BASICs. Monetary Measures of Utility. How much is a gallon of gas worth to a person? Expenditure at going price (“value in exchange”) Value above price/expenditure? Suppose you can buy as much gasoline as you wish at $1 per gallon once you enter the gasoline market.
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CS = ½* qm(pmax- pm)
Expenditure= qm* pmarket
MC = Supply
“Value in Use” = E + CS = “Impact Study”
Policy Change: Excise tax imposed of $t
Deadweight Loss = ½ *(p1-pm)*(qm-q1)
Expenditure of tax revenues in
Added CS + Expenditure =
Pm2(q2-qm2) + ½ p2(q2-qm)
½ *(p1-pm)*(qm-q1) – P2m(q2-qm2) ½ p2*(q2 – qm2)
Output price (p)
Producer Surplus = q1*pm - VC
Variable costs =