EEP 1 Review
S and D
Curve vs. quantity
Movements and shifts
Complements and substitutes
Ceiling and floor; shortage surplus
Market and individual’s curves- horizontal addition
Elasticity
Consumer theory
Consumption bundle
Preferences
Budget line
Indifference curves
Slope down
Don’t cross
Moon shaped
Tangency of budget line and indifference curve
Normal and inferior
Derivation of demand curve
With endowment
Stated and Revealed Preference
Passive use
Revealed preference
Averting
Hedonic
Travel cost
Stated Preference
Referendum “would you vote Y/N if it cost you $X”
Need to have specific project
Need to emphasize alternative uses of money
Lying possible when open ended (how much…)
Production and the firm: the cost curve
Production function
Isoquant
Isoexpenditure or isocost
Chosen inputs
Derive cost curve
Derive conditional factor demand
Production: choosing Q
Opportunity cost
Economic v. business profit
Marginal cost
Area under mc is VC
C = fc + vc
AC is U shaped drawing and explanation
Supply curve: price taker
P = mc
Mc above avc
Long and short run supply
Long run compet. Equilibrium
Profits are zero
P = mc
S=D
Welfare
Total Willingness to Pay
Consumer surplus
EV and CV
Competition maximizes profits plus surplus
Allocation
Pareto improving an pareto efficient
Competitive equilibrium is a pareto optima
Specific Tax
Incidence
Deadweight loss
Farm Programs
Loan program
Target price-deficiency payment
DWL
Output tax or quota to solve pollution
MC of pollute and total MC
DWL from doing nothing
Tax revenue and quota rents
Monopoly
MR
Why in competition MR = P
MR=MC implies Q
D(Q) = P
Profits
DWL
Regulating Polluting input
(could be clean air services itsel, e.g. pollution)
TBES defined
Tax and standard, compared
Cost difference
Effect on AC, hence of LR compet equilibrium
Pollute tax changes pollute/output and output
Public Good
TWTP
Why compet doesn’t max TWTP – costs
Coase
MCA (Marginal cost of abatement)
Firm and Consumer MCA = Marginal Benefit
Two firm diagram: why trading good
Case where initial allocation doesn’t matter for pollution
What to do when transaction costs are high
Interest Rate and Cost Benefit Analysis
Present Net Value
Cost Benefit Analysis
Natural resources
Hotelling exhaustible model
S=D, price increase at rate of interest, feasible
4 quadrant diagram
Effect of changed stock, interest rate
Open access
If you don’t take it today somebody else will
Can’t let fish grow and get them later
Major Env. Laws
Clean air act
NAAQS National goals
State plans
CA: Reclaim
New source TBES
Rules for cars, trucks etc TBES
National
CA exemption
Toxics
Acid Rain trading program
CERCLA
Natural resource damages
Strict liability for leaking to environment
EPA can clean up using “superfund” and try to collect later
NEPA
Must write EIS and expose to public
Clean water act
Federal: TBES for point source including animal feeding
State: choose quality at least fishable/swimable
Set TMDL to meet quality goal
Allocate TMDL among emitters
Ag. Other than animal feeding seems exempt
Sect 404 stringent protection for wetland
Ledpa process
No net loss
Endangered Species Act
Listing
No harming listed creatures
Private land and taking
Public land, an absolute
Habitat conservation plans allow compromise