1. Review for Quiz 1 (Everything through Chapt 5)
Peter Berck
2015
Env. Econ. 1

2. Supply and Demand Supply and Demand demand vs. quantity demanded
supply vs. quantity supplied
movements along vs. shifts of S & D
price ceiling, price floor
Excess supply/demand
market & individuals' demand curves
horizontal summation
specific tax
tax incidence
elasticity of demand and supply
complementary vs. substitute goods
normal and inferior goods

3. Tax example Ps = 0.25 Q Pd = 3 – .4 Q t= .6 D-1(Q) – t = S-1(Q)
Pd t = Ps

4. Tax
Incidence
Flat and vertical supply curve

5. Loan rate A price floor supported by government purchase. Demand
?treasury outlay QD PL
Demand
Supply QL
Excess supply

6. Consumer Theory consumption bundle* *=learn the definition
Preferences*
budget line or budget constraint*
indifference curve*
properties of indiff. curves
(1) slope down (2) don't cross (3)"moon" shaped
derivation of demand curves
Why tangency of budget line & indiff curve
Change price

7. Demand Curve
Price of Wine is 8

8. Normal & Inferior Again
What happens to q demanded with increased income?

9. Sale 10 at normal price of 5 and then rest at half price of 2.5.
Price of other good is 1 and income is 100
Draw budget constraint with sale

10. Pareto Improvement*
When at least one party to a deal is made better off and no parties are made worse off the deal is said to be Pareto improving.
Examples of market trades that are pareto improving
Examples of market trades that are NOT pareto improving

11. What Goes Wrong With Markets
Reasons for
No ownership; open access*
Externalities*
Public Goods (non-rival; non-excludable)*
Insufficient weight on future
Government Failure
Give examples of each

12. Surplus,EV,CV Total Willingness to Pay* Amount Paid Consumer Surplus*
Surplus from a public good
Define EV* and CV* for a price change.

13. Willingness to Accept and Willingness to pay questions.
When are they EV and when are they CV