(nov 2) ENVR 201: Benefit/Cost and Policy Options

Vocabulary flashcards covering welfare principles, resource allocation dilemmas, Cost-Benefit Analysis (CBA), and Cost-Effectiveness Analysis (CEA) from ENVR 201.

Ozone

A pollutant harmful to health that is emitted (produced) by vehicles in cities worldwide.

lower the level of ozone until the cost of lowering = the benefit of lowering or if cost < benefit

Ozone is harmful to health, yet still gets emitted by vehicles in your city worldwide, how should we decide how much pollutant is too much?

Opportunity Cost

• The best of all available alternatives to a given action

• not money

Benefits and Costs

• Analytical categories used to break down the net benefit of a given course of action.

Cost-Benefit Analysis (CBA)

• An evaluation framework that assigns a monetary value to all benefits and costs—including non-market items like health and natural

• selects the option with the largest net benefit ($B - C$), answering both 'should we?' and 'how much?'

Net Benefit ($B - C$)

The difference between total benefits ($B$) and total costs ($C$), maximized in Cost-Benefit Analysis to identify the optimal choice

Cost-Effectiveness Analysis (CEA)

• An evaluation method that identifies the cheapest way to achieve a predetermined goal without monetizing benefits

  • it cannot determine whether the goal itself is worth pursuing