CHAPTER 2

Cost-Benefit Analysis and Individual Preferences

It has been said that democracy is the worst form of government except all the others that have been tried.

—Sir Winston Churchill

Chapter 2 Preview

When you have completed reading this chapter you will:

realize that market prices and surveys provide valuable information about individuals’ needs and wants;

note that cost-benefit analysis (CBA) templates list costs and benefits separately;

understand the importance of willingness to pay (WTP) and willingness to accept (WTA) as measures of a community’s valuation of goods and services;

differentiate between cost effectiveness analysis (CEA) and CBA;

have an intuitive understanding of conflicts and contradictions associated ...

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