Econ 1101 1st Edition Lecture 20Outline of Last Lecture 1. Trade Policy2. China and US Trade3. MobLab ExperimentOutline of Current Lecture 4. Public Goods5. Consumer Theory6. Preferencesa. Perfect Substitutesb. Perfect Complimentsc. Decreasing Marginal Rate of SubstitutionCurrent LecturePublic GoodsPrivateRivalrous--> “If I eat it, you can't”Excludable--> people can be excluded from using itPublicNonrivalrous--> one’s usage doesn’t take away anyone else's usageNonexcludable --> can't prevent anyone from usingExample: tornado sirens, street lamp, national defense, research with no patentWith a private good, you make unit of output and give to person if marginal willingness to pay exceeds the marginal cost.With a public it's the same benefit with different marginal willingness except people can pay different and receive the same benefits.Taxes? Who pays for road construction?Add the willingness to pay of each otherIn PowerPoint example, it is socially efficient to build artificial sun. These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.In a free market--> free loader problem --> no one wants to put in the money themselvesNote:with technology change, things can become excludable that before were not and vice versa. In the real world you might not see the benefits--> is it still a public good?An entrepreneur makes a sun and sells sunglasses. D1-D5 buy glasses. 25$ revenue with $20 investment. It is now an excludable good.Common ResourcesNonexcludable RivalrousExample: world fishing stocks“Tragedy of the commons”Should we make fishing excludable? Fish farming?Consumer TheoryHow is demand found in the first place?What determines your demand for an item? How did you determine your value of that item?Spam juice and spam curds (similar to coconuts and fish)Consider change in graph when:Price of juice changesPrice of curds changes Income changes Budget ConstraintLike the coconut/fish graphSlope= opportunity cost of 1 more fishPrice
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