EC318 Lecture Notes - Lecture 1: Demand Curve, Economic Surplus, Net Present Value
Document Summary
If society gives more weight for current assumption, the future may end up without sufficient resources. Coase theorem: argues that efficient outcomes can result from assigning rights to goods or behaviours and then allowing trades, regardless of who gets the initial right. Coase theorem: will not solve externality problems in a number of settings, the presence of high transaction costs, difficulties defining allocation rights. Imperfect information: the ability of right, violators to escape consequences for their violations. If does not create any harm to an economy: at least one person benefits from the exchange or transaction. An exchange or market is pareto optimal if: no further improvement could be made. Intro: three commonly used metrics are npv, benefit-cost ratio, and irr, benefit-cost is a way of understanding the efficiency of public activities, cost-benefit criterion is simply a test of whether the benefits exceed he costs.
