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Environmental and Transportation Economics - Coggle Diagram
Environmental and Transportation Economics
0.
Economics refresher
Competition
Imperfect competition
Non-monopolistic
Cournot competition
Each competitor sets the quantity produced -> q produced by others
Bertrand competition
Price competition leads
If products are different -> each supplier has mkt power and proces > marginal costs
If products are identical -> price is set by lowest cost competitor at 2nd marginal cost
Monopoly
Deadweight loss
Lost gains from trade caused by a market innefficiency
Equilibrium (q*) -> Marginal revenues = Marginal costs
Marginal revenue = P(q)-C(q)
the change of revenue per change of quantity
Perfect competition
Competitive market equilibrium
Prices are not influenced by one supplier, all suppliers offer same standardized product. Large number of suppliers and buyers.
It maximizes consumer surplus (CS) and producer surplus (PS)
Market power
Taxation
Excise tax (impuesto al consumo)
Costs
External costs
Costs imposed on 3rd parties that are not compensated
Net surplus
Net surplus = gross surplus - production costs - environmental costs or any external cost
Marginal social cost = Marginal external costs + marginal cost
Opportunity costs
Benefits you could have received but passed up in pursuit of another option
Value of time
Saving time in transportation
wage / hr
Value of life
Prevention of accidents
Investment costs
Not recurring expenses
Present value
NPV = (benefits(t) - costs(t)) / ((1+i)^t)
Cost benefit analysis
Use a welfare perspective instead of a business perspective
Welfare perspective: maximize net surplus
For calculating profit (pi) you should also include the opportunity costs (this is different in accountable profit)
Welfare
CS + PS
Consumer suprlus + producer surplus
Consumer surplus = MB - Cost. MB=Marginal Benefit, how much valuable it is for the customer, demand curve. They got the good for less than they're willing to pay
Profits
MR-MC -> marginal revenue - marginal costs
Max profits = MR - MC = 0
Profits = TR - TC = TB - TC = Total revenues or benefits - total costs, including the oppirtunity cost
Key concepts
Individual & aggregate supply
Welfare theorems
1st welfare theorem
2nd welfare theorem
Individual & aggregate demand
Demand function: P=a-b*q
1.
Costs of transport
Costs concepts
Private costs
Perspective from individual household or firm
Marginal private cost = resource cost + own time & accidents costs + taxes & tolls - subsidies
Marginal private cost = Marginal social cost
taxes & tols - subsidies = external costs - external benefits
External costs
Cost or benefit that affects society but is not taken into account by the individual (air pollution, noise, etc.)
Social costs
Perspective of society
Taxes are not social costs, because you benefit someone but you also are benefited by someone else
Marginal social cost = resource cost + own time & accidents costs + external costs - external benefits
Marginal private cost = Marginal social cost
taxes & tols - subsidies = external costs - external benefits
Total costs
TC(x)=FC+VAR(x)
Marginal costs
Extra costs of doing something, 1st derivative
MC=dT(x)/dx = dVAR(x)/dx
Important because of behavior: users tend to maximize their use.
Optimal level of activity x
Maximize -> max TSB(x) - TSC(x)
dTSB(x)/dx=dB(x)/dx+dEB(x)/dx
And dTSC(x)/dx=dC(x)/dx+dEC(x)/dx
Obtain: dB(x')/dx+dEB(x')/dx-(dC(x')/dx+dEC(x')/dx) where x' is the optimal level (x*)
Perspectives to take on costs
Private
Social
Inputs for social computations
Economists tend to put costs in everything to compare options. Just as a measuring systems.
Values of time
Value of saving time, value of time that I don't enjoy. (I don't want the limit of riding in moto because I like it, but I want to limit the time I wait in the station, etc.) I value the time I save.
Key learnings
Private costs=social costs
if
taxes=MEC
(marginal external costs)
MEC are not easy to measure
2.
Demand for transport
Basic concepts
Forecasts are not always right
Winner's curse
Political element
Optimism bias
Poor economic specification & poor
econometrics
Fundamental law of highway congestion
If you wait long enough, the congestion level will be the same. Demand is elastic, when you decrease cost you end attracting more.
Flows are not constant, if it was constant then when you increase the capacity of the road maybe the old flow is not kept, it will increase.
Adding capacity to highways will not decrease congestion, except for when highways are tolled or same time rail and subways.
Effects of price increase of a good, utility (way to order different bundles of goods)
Substitution effect
If the price increases, people will tend to substitute it with something else
Income effect
When your income increases or reduces it has an effect everywhere, in all goods. So to consider this income effect is quite complicated, therefore using the quadratic utility function simplifies things.
Utility
A way to order different bundles of goods
The concept of utility is used to model worth or value
La relación calidad-precio (El valor del dinero) que las personas obtienen al consumir un producto o servicio
The pleasure or satisfaction people feel when consuming a good or service
Marginal benefit = perceived benefit when consuming that specific unit (or when consuming an extra unit) = is similar to "willingness to pay"
Modelling the choice process of consumers
Aggregate approach
Useful when you don't have disaggregate data
Quadratic utility function
U (m,x) = m
Transportation expenditures can always be paid out of income
It doesn not consider income effect. Ways simpler.
Uses the aggregate of all demand functions, aggregate all income changes for all these people
Benefit of investment
Benefit of investment = CS computated at prices incl tax (blue area) + additional tax revenues (dotted area)
Disaggregate approach
Scope of research
Focus on the area you're analyzing, discard unusful info
3.
Road pricing
4.
Road investment
5.
Non-price measures
6.
Public transport pricing & investment
7.
8.
Environment & transp
9.
Climate conomics & transport
10-12.
Urban & regional economics