chapter 5 Flashcards
equation to find efficient allocation
P = MC and solve for q
calculating NB on a graph
area above price and below demand
calculating NB with dynamic efficiency
NB/(1 + r)^n
dynamically efficient allocation will satisfy what condition
the PV of MB from the last unit in P1 equals PV of the MNB in P2
equation to find vertical axis on dynamic efficacy graph for P1
PV(MNB0) = P - MC where q1 = 0
equation to find horizontal axis on dynamic efficiency graph for P1
P - MC = 0
equation to find vertical axis on dynamic efficacy graph for P2
PV(MNB0) = (P - MC) / (1 + r)^n where q2 = 0
algebraic way to find MNB
P-MC = P-MC/(1+r)^n
use q1) = (use q2
MUC
PV of forgone opportunities at the margin
will continue to increase as you consume more because the OC increases since you value things more as you have less of it
no scarcity equation
P = MC
scarcity équation
P = MC + MUC
MUC equation
P - MC
aka MNB
veil of ignorance
John Rawls
prevents people from knowing their eventual position in society
people decide on rules to govern society after the decision
Hartwick rule
all of the scarcity rent from the use of scarce resources is invested in capital, the resulting allocation will satisfy the first definition of sustainability
if the principal is declining -
the allocation is not sustainable
