Benefit-Cost
analysis – a comparison of economic benefits and costs to society
of a policy, program, or action.
Bequest Value (option
demand)– the value that people place on knowing that
future generations will have the option to enjoy something.
Consumer surplus –the
difference between the price actually paid for a good, and
the maximum amount that an individual is willing to pay for it. Thus,
if a person is willing to pay up to $3 for something, but the market
price is $1, then the consumer surplus for that item is $2. This measure
approximates, and is bounded by, the more technically precise measures
of economic benefit: compensating
variation or equivalent variation.
Compensating
variation - the amount of money that leaves a person as well off
as they were before a change. Thus, it measures the amount of money
required to maintain a personÕs
satisfaction, or economic welfare, at the level it was at before the
change.