Question

What is willingness to pay? What does it mean? How is it measured (in relation to what standard object from microeconomic theory)? What data do we need?

What are limitations of WTP as a concept?

Why is it challenging to measure WTP for environmental g/s? What are the two broad non-market valuation methods for measuring WTP in the environmental context?

What are the five categories of costs measured in BCA?

What are the three methods for measuring costs? What determines which method to use?

What are the two approaches to measuring compliance costs specifically?

True / False. If a policy is expected to involve a significant behavioral response from consumers or firms with impacts that spill over into other unregulated markets, then the direct compliance cost method is the appropriate method for measuring the costs of the policy. Explain.

Answer 1

QUESTION 1

• Willingness to pay is the maximum amount the consumer would like to pay for a particular good or service.
• The dollar value attached to a product shows the willingness to pay in micro-economics.
• With direct surveys, selected customers are asked to state what proportion of income they might be willing to spend to buy some product.
• The amount they are willing to pay and the amount they actually have to pay is known an consumer surplus.
• In indirect surveys, some kind of ranking procedures are executed for various goods and services so as to estimate a preference structure from which willingness to pay is often calculated.
• We can also look at actual purchase data also to decide about the same.