ECO-4 Lecture Notes - Lecture 30: Avoidance Speech, Economic Equilibrium, Demand Curve
Document Summary
Private benefit : benefit that the consumer of a good/service receives. Marginal benefit: the benefit from an additional unit of a good/service. Marginal private benefit (mb): benefit that the consumer of a good/service receives from an additional unit of it. External benefit: benefit that someone other than the consumer of the good/service receives. Marginal external benefit: benefit from an additional unit of a good/service that people other than its consumer enjoy. Marginal social benefit (msb) : the marginal benefit enjoyed by a society by the consumer of a good/service (marginal private benefit) and by others (the marginal external benefit) Msb = mb + marginal external benefit. The demand curve = marginal benefit curve. Market equilibrium occurs when msb = msc. Public production: a good or service is produced by a public authority that receives its revenue from the government (e. g. education) In this case, tuition is set equal to mb @ same quantity of efficient equilibrium.