Economic Pricing (II)

Question 1

Law of demand (Definition)

Answer 1

inverse relationship between price and quantity.
Exp. if price of oil goes down, the quiantity of oil consumers will buy increase

Question 2

Law of Supply (Definition)

Answer 2

Positive relationship between price and quantity supplied.
Exp. if price of oil goes up, the quantity of oil producers supply increases

Question 3

Equilibrium Price (Definition)

Answer 3

Price where quantity demanded equals quantity supplied (Intersection )
Interecation of producers and cinsumers determine the price of a commodity

Question 4

Public good (Definition)

Answer 4

Good or server characterized by non- exlusivity and non-rivarly. Hence, underprovided by provate marjets. (Exp. LightHouse)

Charaterized by positive extrernalities

Question 5

Common property resource (Definition)

Answer 5

Natural resource that is characterized by non-exclusicity and rovirly ( ocean, air, atmosphere)

Characterized by negative externalities

Question 6

Public good and Common porperty resources (Policy)

Answer 6

Goverments manage / regulate common property resources use or create enforceable property rights; goverment must provide public goods, collecting the necesary funds from society or obligating participation by all. ( no free riders)

Question 7

Non - exclusivity (Definition)

Answer 7

It is constly or impossible to exclude others from using a good. (Lighthouse)

Question 8

Non-Rivalrous (Definition)

Answer 8

Goods may be conusmed by one consumer without preventing simultaneous consumption by others ( bradcats television)

Question 9

Free-rider (Definition)

Answer 9

Someone who benefits from public goods or common pool resources but does not pay for them.

Question 10

Public and Private goods: matrix

Answer 10

Question 11

Future Value (Formula )

Answer 11

FV = PV(1 + r)^t

Question 12

Present Value (Formula)

Answer 12

PV = FV / (1 + r)^t

Question 13

Life Cycle Cost (LLC) (Definition and method 1)

Answer 13

All present and future cost divided by all present and future production, giving a single cost per unit produced.

Method
With standard bank amortization formula convert initial investment into equal annual payment. called annualized capital cost or capital charge rate ( CCR).
Divide this by annual production (assuming it stays the same over time)

Question 14

Energy Efficiency investment

Answer 14

Extra purchase cost of a more efficient device or building or mode of travel for providing the same level of energy service.