The Concept of Investment For a one period investment, the ROR can be evaluated each year. For investments that generate returns in many periods, there are two ways of describing the rate of return
Now Add Production ... Add input markets, output markets, describe firms’ technologies, the distributions of firms’ outputs and profits … That’s not easy!
Structure Definition When to provide a public good – Efficient provision – Private provision: free-riding Variable quantities of public good – Efficient amount – Free-riding problem How to provide public goods? Demand revelation
Revealed Preference Analysis Suppose we observe the demands (consumption choices) that a consumer makes for different budgets. This reveals information about the consumer’s preferences. We can use this information to