microeconomics for public decisions anne c. steinemann

Microeconomics for Public DecisionsAnne C. Steinemann

The Economy as a System

• Figure 1-1

The Economic System Within the

Ecosystem

• Figure 1-2

The Demand Curve

• Figure 2-1

Increase in Demand

• Figure 2-2

Decrease in Demand

• Figure 2-3

Decrease in Quantity Demanded

• Figure 2-4

Increase in Quantity Demanded

• Figure 2-5

The Supply Curve

• Figure 2-6

Increase in Supply

• Figure 2-7

Decrease in Supply

• Figure 2-8

Increase in Quantity Supplied

• Figure 2-9

Decrease in Quantity Supplied

• Figure 2-10

Price Elasticity of Demand

• Page 29 ED =Qf −Qi( ) /Qi

Pf −Pi( ) / Pi

Price Elasticity of Demand

• Figure 2-11

Estimates of the Price Elasticity of

DemandGoodGood Price Elasticity of Price Elasticity of

DemandDemandHousing -0.01

Residential electricity -0.13

Bread -0.15

Bus travel -0.20

Coffee -0.25

Sugar -0.30

Medical insurance -0.31

Legal services -0.37

Elastic Demand

• Figure 2-11a

Inelastic Demand

• Figure 2-11b

Unitary Elastic Demand

• Figure 2-11c

Elasticities Vary Along a Straight

Line

• Figure 2-12

Relationship Between Price Elasticities of Demand, Price, Quantity and Total Revenue

EEDD PricePrice QuantityQuantity Total Total RevenueRevenue

inelastic increase decrease increase

inelastic decrease increase decrease

elastic increase decrease decrease

elastic decrease increase increase

unitary increase decrease no change

unitary decrease increase no change

Price Elasticity of Supply

• Page 42 ES =Qf −Qi( ) /Qi

Pf −Pi( ) / Pi

Derivation of the Market Demand Curve from Individual Demand Curves

PricePrice Consumer Consumer AA

Consumer Consumer BB

Total Quantity Total Quantity DemandedDemanded

P QA QB QT = QA + QB

$8 0.0 0.0 0.0

$7 2.5 0.0 2.5

$6 5.0 0.0 5.0

$5 7.5 0.0 7.5

$4 10.0 2.0 12.0

$3 12.5 4.0 16.5

$2 15.0 6.0 21.0

$1 17.5 8.0 25.5

$0 20.0 10.0 30.0

Derivation of a Market Demand

Curve

• Figure 3-1

Effect of an Increase in Individual Demand on

Market Demand

• Figure 3-2

Derivation of the Market Supply Curve from Individual

Supply Curves

PricePrice Producer Producer AA

Producer Producer BB

Total Quantity Total Quantity Supplied Supplied

DemandedDemandedP QA QB QT = QA + QB

$8 8 4 12

$7 7 3.5 10.5

$6 6 3 9

$5 5 2.5 7.5

$4 4 2 6

$3 3 1.5 4.5

$2 2 1 3

$1 1 0.5 1.5

$0 0 0 0

Derivation of a Market Supply

Curve

• Figure 3-3

Market Demand and Market Supply

Together

• Figure 3-4

Market Equilibrium

• Figure 3-5

Shortage: Quantity Demanded Greater Than

Quantity Supplied

• Figure 3-6

Surplus: Quantity Supplied Greater Than Quantity

Demanded

• Figure 3-7

Change in Equilibrium Due to a

Supply Decrease

• Figure 3-8

Change in Equilibrium

Due to a Demand Increase

• Figure 3-9

Demand for Conventionally Grown

Produce

• Figure 3-10

Decrease in Demand for Conventionally Grown

Produce

• Figure 3-11

Decrease in Supply for Conventionally Grown

Produce

• Figure 3-12

Increase in Demand for Organically Grown

Produce

• Figure 3-13

Increase in Supply for Organically Grown

Produce

• Figure 3-14

Effects of Change in Supply and Demand on Equilibrium Price and

Quantity

SupplySupply DemandDemand EquilibriuEquilibrium Pricem Price

EquilibriuEquilibrium m

QuantityQuantityincrease no change decrease increase

decrease no change increase decrease

no change increase increase increase

no change decrease decrease decrease

increase increase indeterminate increase

decrease increase increase indeterminate

increase decrease decrease indeterminate

decrease decrease indeterminate decrease

Before a Tax

• Figure 3-15

After a $2 Tax on Producers

• Figure 3-16

After a $2 Tax on Consumers

• Figure 3-17

Before a Subsidy

• Figure 3-18

After a $2 Subsidy to Producers

• Figure 3-19

After a $2 Subsidy to Consumers

• Figure 3-20

Price Floor

• Figure 3-21

Price Ceiling

• Figure 3-22

Output Quota

• Figure 3-23

Rent Control

• Figure 3-24

Agricultural Price Supports

• Figure 3-25

Supply and Demand with a Price Cap on

Electricity

• Figure 3-26

Consumer Surplus (A)

• Figure 4-1

Willingness to Pay for Park Visits

• Figure 4-2

Demand Curve for Park Visits

• Figure 4-3

Effect of a Price Change

• Figure 4-4

Comparison of Consumer

Surplus

• Figure 4-5

Indifference Curves for an Individual

Consumer

• Figure 4-6

Substitution and Income Effects for a

Normal Good

• Figure 4-7

Substitution and Income Effects for an

Inferior Good

• Figure 4-8

Budget Line for Budget Constrain of

$80

• Figure 4-9

Point of Maximum Utility

• Figure 4-10

Income Expansion Path

• Figure 4-11

Derivation of Demand Curve

• Figure 4-12

Income Grantfor Infrastructure

• Figure 4-13

Subsidy for Infrastructure

• Figure 4-14

Tied Grant for Infrastructure

• Figure 4-15

Weekday CTA Rapid Rail Passenger Average Before and During Dime Time

Program

Income Income ClassClass

Before Dime Before Dime Time (Fare = Time (Fare =

$0.25)$0.25)

During Dime During Dime Time (Fare = Time (Fare =

$0.10)$0.10)Low 9,500 15,020

Moderate

8,250 10,860

High 5,100 6,410

Total 22,850 32,290

Dime Time Weekday CTA Rapid Rail Passenger

Averages by Prior Mode of Travel

Prior Mode of Prior Mode of TravelTravel LowLow ModeratModerat

eeHighHigh TotalTotal

Dime Time 9,500 8,250 5,100 22,850

Non-Dime Time 625 380 310 1,315

Bus and Trolley 1,080 680 340 2,100

Auto Driver 895 525 400 1,820

Auto Passenger 220 75 80 375

Walk 850 380 90 1,320

Trip Not Made 1,850 570 90 2,510

Total 15,020 10,860 6,410 32,290

Aggregate Demandfor Income Group

• Figure 4-16

Total Changein Consumer

Surplus

• Figure 4-17

Changes in Consumer Surplus for Previous and New Riders

(dollars per day)

Income Income ClassClass

PreviouPrevious Riderss Riders

New New RidersRiders

Change in Change in Consumer Consumer

SurplusSurplus

Low$1,425.

00$414.00 $1,839.00

Moderate

1,237.50

$195.75 1,433.25

High 765.00 $98.25 863.25

Total$3,427.

50$708.00 $4,135.50

Hypothetical Indifference Curves

for an Individual

• Figure A4-1

Costs and Revenues for Meals-on-WheelsNumber Number of Meals of Meals per Dayper Day

TotalTotalRevenuRevenu

ee

VariablVariable Coste Cost

Total Total CostCost

Average Average Total Total CostCost

MarginaMarginal Costl Cost ProfitProfit

0 0 15.00 -15.00

3 18.00 7.50 22.50 7.50 2.00 -4.50

6 36.00 16.50 31.50 5.25 3.50 4.50

9 54.00 30.00 45.00 5.00 5.00 9.00

12 72.00 48.00 63.00 5.25 6.50 9.00

Cost Curvesfor Meals-on-Wheels

• Figure 5-1

Marginal Revenue > Average Variable

Cost

• Figure 5-2

Marginal Revenue < Average Variable

Cost

• Figure 5-3

Breakeven Pointand Shutdown Point

• Figure 5-4

Short-Run Production

• Figure 5-5

Derivation ofthe Supply Curve

• Figure 5-6

Long-Run Average Total Cost

• Figure 5-7

Long-Run Average Total Cost and Economies of

Scale

• Figure 5-8

Long-Run Supply Curve for a

Competitive Firm

• Figure 5-9

Producer Surplus

• Figure 5-10

Decrease in Producer Surplus Due to a Decrease in Price

• Figure 5-11

Vacant Lot Clearance Program

BudgetBudgetPart-Time Young Employees

Wage$60,00

0Fringes 6,000

Supervisory Personnel Quarter Time 5,000Two Full Time 18,000

MaterialsTrash bags, rakes

5,000

Truck rental 6,000

Total$100,0

00

Tons of Trash Collected per Day

as a Function of Daily Use of Trucks and Labor-hours

Trucks per DayTrucks per Day

Labor-Hours per Labor-Hours per DayDay 55 1010 1515 2020

50 20 40 50 60200 65 90 116 128350 93 120 147 161500 107 134 165 187650 110 140 177 205800 110 140 183 217

Tons of Trash Collected per Day by Cambridge

Sanitation Dept.

• Figure A5-1

Isoquant for Output of 100 Tons per Day

• Figure A5-2

Isoquants for Various Daily Output

Levels

• Figure A5-3

Isoquant for Q = 60

• Figure A5-4

Alternate Isoquants for Various Output

Levels

• Figure A5-5

Tons of Trash Collected per Day by Cambridge

Sanitation Dept.

• Figure A5-6

Marginal Product Curve (Q = 5K) of Production for

Fixed Amount

• Figure A5-7

Social Surplus Under Competitive Equilibrium

Conditions

• Figure 7-1

Changes in Social Surplus Due to Deviations from the

Competition

• Figure 7-2

Changes in Social Surplus Due to a

Price Floor

• Figure 7-3

Changes in Total Social Surplus Due to a Price

FloorChanges in Surplus from a Changes in Surplus from a

Price FloorPrice Floor Before Price FloorBefore Price Floor After Price After Price FloorFloor ChangeChange

Consumer surplus I+II+III I -II-III

Producer surplus IV+V II+IV II-V

Social surplus I+II+III+IV+V I+II+IV -III-V

Distribution of Benefits and Distribution of Benefits and Costs of a Price FloorCosts of a Price Floor BenefitsBenefits CostsCosts NetNet

Consumers -II-III -II-III

Producers II -V II-V

Society II -II-III-V -III-V


Price Ceiling

• Figure 7-4

Changes in Total Social Surplus Due to a Price

CeilingChanges in Surplus from a Changes in Surplus from a

Price CeilingPrice CeilingBefore Price Before Price

FloorFloorAfter Price After Price

FloorFloor ChangeChange

Consumer surplus I+II I+III III-II

Producer surplus III+IV+V V -III-IV

Social surplus I+II+III+IV+V I+III+V -II-IV

Distribution of Benefits Distribution of Benefits and Costs of a Price and Costs of a Price

CeilingCeilingBenefitsBenefits CostsCosts NetNet

Consumers III -II III-II

Producers -III-IV -III-IV

Society III -II-III-IV -II-IV

Changes in Social Surplus Due to an

Output Quota

• Figure 7-5

Changes in Total Social Surplus Due to a Output

QuotaChanges in Surplus from Changes in Surplus from

an Output Quotaan Output QuotaBefore Price Before Price

FloorFloorAfter Price After Price

FloorFloor ChangeChange


Producer surplus IV+V+VI II+IV+VI II-V

Social surplus I+II+III+IV+V+VI I+II+IV+VI -III-V

Distribution of Benefits Distribution of Benefits and Costs of an Output and Costs of an Output

QuotaQuotaBenefitsBenefits CostsCosts NetNet


Producers II -V II-V

Society II -II-III-V -III-V

Changes in Social Surplus Due to a Tax

• Figure 7-6

Changes in Total Social Surplus Due

to a TaxChanges in Surplus from a Changes in Surplus from a TaxTax

Before Price Before Price FloorFloor

After Price After Price FloorFloor ChangeChange


Producer surplus IV+V+VI VI -IV-V

Government II+IV II+IV

Social surplus I+II+III+IV+V+VI I+II+IV+VI -III-V

Distribution of Benefits Distribution of Benefits and Costs from a Taxand Costs from a Tax BenefitsBenefits CostsCosts NetNet


Producers -IV-V -IV-V

Government II+IV II+IV

Society II+IV -II-III-IV-V -III-V


Subsidy

• Figure 7-7

Changes in Total Social Surplus Due

to a SubsidyChanges in Changes in Surplus from a Surplus from a

SubsidySubsidy

Before Before Price FloorPrice Floor After Price FloorAfter Price Floor ChangeChange

Consumer surplus I+II I+II+VI+VII+VIII VI+VII+VIII

Producer surplus VI+X II+III+IV+VI+X II+III+IV

Government-II-III-IV-V-VI-VII-VIII-

IX-II-III-IV-V-VI-VII-VIII-

IX

Social surplus I+II+VI+X I+II+VI+X-V-IX -V-IX

Distribution of Distribution of Benefits and Costs Benefits and Costs

from a Subsidyfrom a SubsidyBenefitsBenefits CostsCosts NetNet

Consumers VI+VII+VIII VI+VII+VIII

Producers II+III+IV II+III+IV

Government-II-III-IV-V-VI-VII-

VIII-IX-II-III-IV-V

-VI-VII-VIII-IX

SocietyII+IIII+IV+VI+VII

+VIII-II-III-IV-V-VI-VII-

VIII-IX-V-IX

Effect of a Tariff on Social Surplus

• Figure Q7-1

Competitive and Monopolistic Markets:

Supply

• Figure 8-1

Competitive and Monopolistic Markets:

Demand

• Figure 8-2

Revenue for a Monopolist

Average Average Revenue Revenue (price)(price)

OutputOutputTotal Total

RevenuRevenuee

MarginaMarginal l

RevenuRevenuee

$10 1 $10 $10

9 2 18 8

8 3 24 6

7 4 28 4

6 5 30 2

5 6 30 0

4 7 28 -2

3 8 24 -4

2 9 18 -6

1 10 10 -8

Marginal Revenue and Average Revenue for a

Monopoly

• Figure 8-3

Monopoly Price and Output

Determination

• Figure 8-4

Monopoly Profits

• Figure 8-5

Monopoly Price Regulation

• Figure 8-6

Comparison of Marginal Cost Under Perfect Competition

and Monopoly

• Figure 8-7

Negative Externalities: Social Costs Greater Than Private Production Costs

• Figure 9-1

Negative Externalities: Social Costs Greater Than Private Consumption Costs

• Figure 9-2

Negative Externalities: Social Costs Greater Than Private Production Benefits

• Figure 9-3

Negative Externalities: Social Costs Greater Than

Private Consumption Benefits

• Figure 9-4

Bargain Between Two Parties

• Figure 9-5

The Efficient Solution: Marginal Benefits Equal

Marginal Costs of Positive Externality

• Figure 9-6

The Efficient Solution: Marginal Benefits Equal

Marginal Costs of Negative Externality

• Figure 9-7

Results of CV Experiment for the Indianapolis

Crooked Creek Greenway

Property Property OwnersOwners

RenterRenterss

County County ResidentResident

ss

Respondents - Survey 47% 8% 26%

Respondents - Solicitation 39% 7% 17%

Prior CCG Awareness 18% 11% 9%

Willing to Contribute Survey 51% 35% 22%

Willing to Contribute Solicitation

36% 14% 11%

Mean WTP — Survey $47.20 $10.71 $29.07

Mean WTP — Solicitation $32.24 $13.33 $34.50

Monthly Cost of Pollution ReductionQuantity Quantity Removed Removed

(tons)(tons)

Knotty PineKnotty Pine Wall BoardWall Board

Total CostTotal Cost Marginal Marginal CostCost Total CostTotal Cost Marginal Marginal

CostCost

1 $200 $200 $500 $500

2 600 400 1,000 500

3 1,200 600 3,500 2,500

4 2,000 800 7,000 3,500

5 3,000 1,000 12,000 5,000

6 5,000 2,000 20,000 8,000

7 8,000 3,000

8 12,000 4,000

9 20,000 8,000

10 36,000 16,000

Marginal Costs of Pollution ReductionReduction Reduction

(tons/month)(tons/month) Knotty PineKnotty Pine Wall BoardWall Board TotalTotal

1 $200 $500 $200 (KP)

2 400 500 400 (KP)

3 600 2,500 500 (WB)

4 800 3,500 500 (WB)

5 1,000 5,000 600 (KP)

6 2,000 8,000 800 (KP)

7 3,000 1,000 (KP)

8 4,000 2,000 (KP)

10 16,000 3,000 (KP)

15 8,000 (WB)

Tax to Correct for Negative Externality

• Figure 9-8

Subsidy to Correct for Positive Externality

• Figure 9-9

Marketable Pollution Permits

• Figure 9-10

Classification of Goods

• Figure 10-1

Demand for Two ConsumersPricePrice Consumer AConsumer A Consumer BConsumer B

$10 0 0

9 1 2

8 2 4

7 3 6

6 4 8

5 5 10

4 6 12

3 7 14

2 8 16

1 9 18

0 10 20

Consumer Demand

• Figure 10-2

Market Demand: Private Production

PricPricee

Consumer Consumer AA


Market Market DemandDemand

$10 0 0 0

9 1 2 3

8 2 4 6

7 3 6 9

6 4 8 12

5 5 10 15

4 6 12 18

3 7 14 21

2 8 16 24

1 9 18 27

0 10 20 30

Determining Market Demand: Private

Production

• Figure 10-3

Aggregate Demand:Public Production

QuantiQuantityty

Consumer Consumer AA


Total Social Total Social BenefitsBenefits

1 $9.00 $9.50 $18.50

3 7.00 8.50 15.50

5 5.00 7.50 12.50

7 3.00 6.50 9.50

9 1.00 5.50 6.50

10 0.00 5.00 5.00

12 4.00 4.00

14 3.00 3.00

16 2.00 2.00

18 1.00 1.00

20 0 0

Determining Aggregate Demand: Private

Production

• Figure 10-4

Combining Demand Curves for a Private

Good

• Figure 10-5

Combining Demand Curves for a Public

Good

• Figure 10-6

Majority Voting InefficienciesInefficient No Inefficient No VoteVote JohnJohn ClaireClaire CatherinCatherin

eeSumSum

Benefits $650 $350 $300$1,30

0

Costs 400 400 400 1,200

Vote yes no no noInefficient Yes Inefficient Yes VoteVote JohnJohn ClaireClaire CatherinCatherin

eeSumSum

Benefits $450 $450 $0 $900

Costs 400 400 400 1,200

Vote yes yes no yes

Voting ParadoxJohnJohn ClaireClaire CatherineCatherine

Path 1st choice 3rd choice 2nd choice

Park 2nd choice 1st choice 3rd choice

Pool 3rd choice 2nd choice 1st choice

Majority Voting Majority Voting OutcomesOutcomes

Path vs. Park Path winsPark vs. Pool Park winsPath vs. Pool Pool wins

Demand for a Public Good with a Marginal

Cost of Zero

• Figure 10-7

Demand and Costs for a Utility Company

• Figure 10-8

Demand and Costs for Two Publicly Provides Goods

with Different Demand Curves

• Figure 10-9

Pricing Options for a Publicly Provided

Good

• Figure 10-10

Demand and Costs for a Public Facility with Variable Demand

• Figure 10-11

Market for Low-Quality Cars

• Figure 11-1

Market for High-Quality Cars

• Figure 11-2

Utility of Income

• Figure 11-3

Utility Function for Risk-Averse Individuals

• Figure 11-4

Utility Function for Risk-Prone Individuals

• Figure 11-5

Utility Function for Risk-Neutral Individuals

• Figure 11-6

Decision Tree for Calculating Expected

GPA

• Figure 11-7

Decision Tree for Water Management

Decision

• Figure 11-8

Utility Curve for Money: $0 to $100

• Figure 11-9

Value of Perfect Information for Water Management Decision

• Figure 11-10

Value of Imperfect Information for Water Management Decision

• Figure 11-11

Cash Flow Diagram and Time Positions

• Figure 12-1

Positive and Negative Cash

Flows

• Figure 12-2

Relationships Between Present, Future and Annual

Values

• Figure 12-3

Example: Savings and Withdrawals

• (a) Deposit $1,000 into bank account


• (b) Present value


• (c) Deposit at beginning of year


• (d) Present value of future withdrawal


• (e) Present value of annual payment


• (f) Present value at end of 10 years


• (g) Annual payments to pay bond issue


• (h) Annual payments over 20 years


• (i) Present value of four years tuition

Examples of Private Sector and Public Sector Cost-

Benefit Analyses

• Figure 13-1

Comparison of Alternatives by

Different Methods of CBAProject A Purchase Project A Purchase

Park Maintenance Park Maintenance EquipmentEquipment

Project B Purchase Project B Purchase Street Repair Street Repair EquipmentEquipment

Initial Investment Savings

-$8,000 -$8,000

Year 1 $1,000 $6,000

Year 2 2,000 2,000

Year 3 2,000 2,000

Year 4 7,000 1,000

NPV (5%) $2,253 $2,079

NPV (10%) $846 $1,293

B/C ration (5%) 1.28 1.26

B/C ration (10%) 1.11 1.16

Internal rate of return

13.6% 20.3%

Incremental ROR 5% 10%

Payback period 4 years 2 years

Net Present Value Method

• Page 335 NPV =Bt

1+ r( )t

t=0

n

∑⎡

⎣⎢⎢

⎤

⎦⎥⎥−

Ct

1+ r( )t

t=0

n

∑⎡

⎣⎢⎢

⎤

⎦⎥⎥

Benefit-Cost Ratio

• Page 336 B /C =

Bt

1+ r( )t

t=0

n

∑⎡

⎣⎢⎢

⎤

⎦⎥⎥

Ct

1+ r( )t

t=0

n

∑⎡

⎣⎢⎢

⎤

⎦⎥⎥

Internal Rate of Return

• Page 338Bt1+ r( )

tt=0

n

∑⎡

⎣⎢⎢

⎤

⎦⎥⎥=

Ct

1+ r( )t

t=0

n

∑⎡

⎣⎢⎢

⎤

⎦⎥⎥

Comparison of Alternatives by Incremental Rate of

Return AnalysisProject Project

AAProject Project

BBProject Project

CCInitial investment

-$8,000 -$8,000 -$10,000

Year 1 1,000 6,000 5,000Year 2 2,000 2,000 3,000Year 3 2,000 2,000 2,000Year 4 7,000 1,000 4,000Rate of return 13.6% 20.3% 16.2%


Return Analysis

First PairwiseFirst PairwiseProject A Project A (challeng(challeng

er)er)

Project B Project B (defende(defende

r)r)

IncrementIncremental Cash al Cash

FlowFlowInitial investment

-$8,000 -$8,000 $0

Year 1 1,000 6,000 -5,000Year 2 2,000 2,000 0Year 3 2,000 2,000 0Year 4 7,000 1,000 6,000Rate of return 13.6% 20.3% 6.3%


Return AnalysisSecond Second PairwisePairwise

Project C Project C (challenge(challenge

r)r)

Project B Project B (defende(defende

r)r)

IncrementIncremental Cash al Cash

FlowFlowInitial investment

-$10,000 -$8,000 -$2,000

Year 1 5,000 6,000 -1,000Year 2 3,000 2,000 1,000Year 3 2,000 2,000 0Year 4 4,000 1,000 3,000Rate of return 16.2% 20.3% 9.6%

Distribution of Benefits and Costs:

Positive Net BenefitsSusaSusa

nnLaurLaur

aaDebrDebr

aaJohnJohn

Benefits $10 $100 $10 $10

Costs -$20 -$20 -$20 -$20

Benefits - Costs -$10 $80 -$10 -$10

Net Benefits = -10 + 80 -10 -10 = $50

Distribution of Benefits and Costs: Negative

Net BenefitsSusaSusa

nnLaurLaur

aaDebrDebr

aaJohnJohn

Benefits $20 $20 $20 $20

Costs -$10 -$60 -$10 -$10

Benefits - Costs $10 -$40 $10 $10

Net Benefits = -40 + 10 + 10 + 10 = -$10

Demand for Bridge Crossings

• Figure 14-1

Effects of Sultan Island Bridge

CostsCosts

Previous ferry riders $25,000

New travelers $25,000

Ferry owner -$5,000

Taxpayers -$40,000

Unadjusted net dollar impact $5,000

Effects of Sultan Island Bridge ($0.25

toll)CostsCosts

Previous ferry riders $12,500

New travelers $6,250

Ferry owner -$5,000

Taxpayers -$15,000

Unadjusted net dollar impact -$1,250

Demand for Bridge Crossings (fare of

$0.25)

• Figure 14-2

Demand for Ferry Crossings

• Figure 14-3

Parkview Recreational Facility

Annual CostsCosts/yearCosts/year

Construction and land acquisition costs

$50,000

Forgone tax revenue 10,500

Annual operating expenses 14,000

$74,500

Demand for Parkview

Recreational FacilityAdmission FeeAdmission Fee Annual Number of Annual Number of

UsersUsers$1.20 0

1.10 10,000

1.00 20,000

0.90 30,000

0.80 40,000

0.70 50,000

0.60 60,000

0.50 70,000

0.40 80,000

0.30 90,000

0.20 100,000

0.10 110,000

0 120,000

Demand for Parkview

Recreational Facility

• Figure 14-4

Low-Income and Total Demand for Recreational

Facilities

• Figure 14-5

Price Floor and Price Ceiling

• Figure Q3-1

Consumers vs. Producers Bear Full

Amount of Tax

• Figure Q3-2

Change in Consumer Surplus

• Figure Q4-1

Effect of a Tariff on Social Surplus

• Figure Q7-1

Demand for Parking Spaces

• Figure Q13-1

microeconomics for public decisions anne c. steinemann

Documents

b slide

supply figure

demand increase figure

market demand figure

steinemann slide

c slide

inelastic demand figure

market demand curve