# HW4 - RishiSanghvi CostBenefitAnalysis Econ421001 HW4 Due...

This preview shows pages 1–3. Sign up to view the full content.

Rishi Sanghvi  Cost Benefit Analysis  Econ 4210-01 HW 4 Due: 03/16/2010 Question 1:  (a) Price   \$ 0.025/lb to \$0.050/lb, Quantity   2.40 lb/p/d to 2.20 lb/p/d  Quantity falls by 0.20 lbs/p/d Gain in benefits = reduction in social costs – lost benefit Total reduction in social cost = (\$0.06/lb) X (2.40 lbs/p/d – 2.20 lbs/p/d) = \$0.012/p/d Lost benefits (Area under the demand curve) = (.5) X (\$0.025) X (0.2 lbs/p/d) + (\$0.025) X (0.2  lbs/p/d) = \$0.0075/p/d Gain in benefits = \$0.012/p/d - \$0.0075/p/d = \$0.0045/p/d Population = 100,000 people  Annual net benefits  = \$0.0045 X 100,000 X 365 =  \$164,250. (b)  Q f  = 2.31 lb/p/d P f  = \$0.05/lb Constant Elasticity Demand: Q = a*P (b) b = elasticity of demand = -0.053,  a = 1.97 Q = 1.97*P  (-0.053) 1 | P a g e

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Net Benefits per person: NSB/p = (\$0.06 -\$.025)*(0.09) + (\$0.05 - \$0.025)*(2.31) - 1.97*P (-0.053)      … from .025 to .05 = \$0.0609 – ( . * ( . ) . 1 97 P 0 947 0 947 )    …from .025 to .05 = \$0.0609 – (\$0.1219 - \$0.0632) = \$0.0609 - \$0.0587
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern