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Unformatted text preview: in tax Example Activity = x = driving to target Extra cost of doing x vs. extra benefit of doing x Alarm clock $20 at bookstore $10 at target Extra benefit- $10 (what is saved) Extra cost- time, gas, safety - how to quantize these ? Think of the minimum amount one would pay someone to do the activity o Suppose the extra cost is $8. Therefore, the economic surplus : the difference between extra benefits and extra cost of doing the action o Economic surplus = extra benefit - extra cost = $10 - $8 = $2...
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This note was uploaded on 03/30/2009 for the course ECON 1 taught by Professor Tang during the Winter '08 term at UCSD.
- Winter '08