Econ 131 lecture 3

Econ 131 lecture 3 - TA Sessions First TA session on Monday...

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Unformatted text preview: TA Sessions First TA session on Monday to cover problem set 1 TA ofce hours -- regular hours plus extra hours before exams For all times and locations check TED (well post details on the rst TA session and hours later this week) Reading Today: Chapter 3 Next week Tuesday: Chapter 4 and start Chapter 5 Thursday: Chapter 5 Discounting, solving for r Use algebra to write down the range of discount rates that make the following project a good idea: Build renewable energy sources for San Diego at a cost of one billion dollars in 2010. Get a beneFt of 10 billion dollars in 2060 because the severity of climate change will be reduced. Discounting a stream of beneFts How would we calculate the present value of the following: $5 billion next year $5 billion in 2 years nothing for years 3-9 $10 billion each in years 10 and on Measuring costs Opportunity cost: what could have been achieved if using the same resources for another purpose Instead of building pollution control equipment, we could use the labor, capital, and materials to build other goods If prices are available, they provide an easy way to measure opportunity cost: the value of labor or materials is equal to their price Opportunity cost example Hire a guard for a sea turtle nesting site in Malaysia Wages for unskilled labor of $10/day One turtle saved each 5 days of guarding Opportunity cost? The worker could have been producing other products worth $10 each day We give up $50 worth of other products for each turtle saved Prices For most goods including labor, capital, land, and many commodities we can regard the market price as the opportunity cost of using that good Intuition: At the margin, the market price represents the marginal value to people who currently buy that good This tends to make the cost side of environmental policy problems relatively easy to measure since cost is often in terms of marketed goods or services What are some examples where this is true?...
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Econ 131 lecture 3 - TA Sessions First TA session on Monday...

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