Zerbe and Bellas, Chapter 6

Valuing outputs (net benefits) in markets

Large Quantity

1. Using CS and PS [Figure 3]
2. Using WTP and MC
3. Using pre-project prices
4. Using post-project prices
5. Bias = .5*ΔQ*ΔP
6. %ΔP = (ΔQ/Q)/(-PED + PES)

Small quantities

1. Perfectly elastic demand
2. Bias using the constant WTP assumption if it is a large quantity (see above)

Perfectly inelastic demand (consumers don't have time to adjust)

1. Benefit = ΔCS = ΔP*Q

When there are taxes

1. Large Quantity [Figure 4]
2. Small Quantity (constant MB = perfectly elastic demand)
3. Standing

Other distortions

1. Price ceiling
2. Price floor
3. Extra-market distribution