CHAP 8: Economic Benefits Analysis
1. Submersible benefits/costs: Benefits/expenses that have been incurred and cannot be
changed
- > do not affect the decision to choose -> Excluded from the calculation results
I have to eat all this food because I lost money to buy it
- I'm going to watch this movie. It's a terrible movie. But it took me an hour to see it.
I had a lot of love for him. He's not good, but... I can't break up because I've been in love for 5
years, there are so many memories, my family and friends know...
=> Economic analysis does not do it because the past time has not been regained but the future
has expectations (Whether done or not, it does not change the past)
2. Transfer payment
- Direct transfer payments: income tax, property tax, unemployment benefit,...
- It affects the decision to invest in the project, but not the cost to society. CIT is not counted in
economic benefits.
-> Not included in the calculation
- Tax and fee discrimination
3. Donations and contributions in kind/non-in-kind
It should be taken into account when analyzing from a social point of view.
4.
Externality - The concept
- > to change social welfare, which should be identified and quantified
- May be in the form of lice or benefits
- Define range
+Space
+ Time
Use an environmental impact assessment report.
5. Opportunity cost
Concept: The opportunity cost of one resource is the value of the best option overlooked when
using resources in that choice.
- Note: money, labor, resources - environment ...
6. Avoid duplication, avoid omissions
For example: - Wastewater discharge plant into the river - Wastewater fee payment plant Community hires private company to treat pollution
→ Only once
7. Measure the economic value of costs and benefits
- Goods with foreign trade capacity and no foreign trade capacity
- Non-market goods
8. Goods capable of foreign trade
- Goods are divided into 3 categories:
+ Inability to import and export + Import and export can be exported + Can be imported and
exported
→Producer 1: goods are not capable of foreign trade + Due to the nature: Real estate,
accommodation services + Non-economic: too large production and transportation costs For
example, haircut services→Ss 2 and 3 are called goods capable of foreign trade
9. Goods that are not exportable/imported
9.1. Inability to export - Consider the G commodity market, S supply line, D-bridge line →
balance E (P0, Q0) - If the foreign market is in demand with goods → the Dex demand line at P1
price - If P1<P0 -> goods cannot be exported
9.2. Inability to import
- Consider the G commodity market, S supply line, D-bridge line → balance E (P0,Q0) - If there
are imports from abroad→ sim supply line at P2 price - If P2>P0 → goods cannot be imported
10. Goods without foreign trade capacity
*Conversion factor: CF will be charged for imports and exports (state-regulated)- CF = EP/FPEP = economic price- FP = financial price
- Foreign trade - Exportable goods: P1 (FOB - IMPORT) > P0 + Importable goods: P2
(CIF+IMPORT) < P0
11. Quantity of goods capable of foreign trade-> Review on a case-by-case basis◦ Increase in
input demand of the project increases imports ◦ Increase the input demand of the project reduces
exports ◦ Increase the output supply from the project reduces imports ◦ Increase the output
supply from the project increases exports
B. Goods with foreign trade capabilities
1. Inputs capable of importing (attributable to local currencies)
- When there is no project: domestic supply line S, D0 bridge line →Crom E (P0, Q0) - When
there is import of → Import volume: Q0D - Q0S - When there is a project, the bridge line must:
D1 → import increase Q1D - Q0D - The social cost of this input for the project is the social cost
payable to Q1D - Q0D unit of additional imports (Q0D - Q0S is quantity of imports; Q0S is the
amount of domestic supply)
* SupposeEm : Exchange rate : Import taxPcif: CIF price in foreign currencyFm: transportation
costs from port to project
- Financial cost / unit = Em * Pcif * (1+tm) + FM
-> The main article EP/FP:+ Import duty/subsidy (state subsidy to encourage imports) (if any) is
transfer payment -> is not social expenses + Use the ball exchange rate (different from market
exchange rate)Ee = Em + Exchange premium fee + Use the economic cost of shipping (CF
adjustment coefficient)
=> Economic cost/unit = Ee*Pcif + Fm*CF
2. Exportable inputs
- When there is no project: domestic supply line S, bridge line D0 - This input is exported →The
export goods: Q0S - Q0D - When there is a project → Export reduction Q1D - Q0D - The social
cost of this input for the project is the social benefit lost when there is Q1D - Q0D units of
goods are no longer exported
* CallEm: Exchange rateitx: Export tax ratePfob: FOB price in local currencyFx : shipping costs
from manufacturer to export portFd: Shipping costs from manufacturer to the foot of the works
(to project)
=> Financial cost/unit = Em*Pfob*(1-tx) - Fx + Fd
- > Adjustment ep/FP:+ Allowance (if any) is transfer payment -> is not a social cost + Export
tax: calculated, as this is a social benefit lost when no longer exported (foreigners pay into the
state budget)+ Use the Ee = Em + foreign exchange bonus fee + Use the economic cost of
transportation
(adjustment coefficient) CF)
→The social charge/unit = Ee*Pfob - Fx*CF + Fd*CF
3. The output of the project is potentially imported
* When there is no project: domestic supply line S0 , bridge line D - When there is import →
Import volume: Q0D - Q0S - When there is a project → import reduction Q1S - Q0S - The social
benefit of the project is the domestic resources saved for Q1S - Q0S aviation units do not need
to import anymore
* When there is a project: right supply line: S1 domestic supply → increase: Q1S → import
reduction Q1S - Q0S - The social benefit of the project is the domestic resources saved for Q1S Q0S aviation units need to import anymore
* Call - Em: exchange rate - tm: import tax rate - Pcif: CIF price in foreign currency - Fm:
shipping costs from port to importer - Fd : shipping costs from project to market
=> Financial price: Em*Pcif *(1+tm) + Fm - Fd
-> Adjustment:+ Import duty/subsidy (if any) is transfer payment -> is not a social cost+ Use the
ball rate:Ee= Em + foreign exchange bonus cost+ Use of the economic cost of shipping (CF
adjustment coefficient)-> Social Benefits/unit = Ee * Pcif + Fm*CF - Fd*CF
4. Project head with output is exportable
* Suppose - Em: exchange rate - tx : export tax rate - Pfob: FOB price in foreign currency - Fx :
shipping costs to export port
=> Financial price = Em*Pfob*(1-tx) - Fx
- Main thing:• Subsidy (if any) is that transfer payments → not a social benefit • Export tax:
calculated, as this is the amount foreigners are willing to pay • Use the Ee = Em + foreign
exchange bonus fee • Use the economic cost of shipping (CF adjustment coefficient)
→The social utility/unit = Ee*Pfob - Fx*CF
SUMMARY:
● Economic cost of import input = CIF price + economic cost from port to project
● Economic cost of export input = FOB price + economic cost from exporter to project economic cost from exporter to port
● Economic benefits of imported output = CIF price + economic cost from port to importer
- economic costs from project to market
Economic benefits of exportable output = FOB price - economic costs from project to port