Demonstrate that equations 4.1 and 4.2 embody an assumption that there are no externalities in either consumption

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Demonstrate that equations 4.1 and 4.2 embody an assumption that there are no externalities in either consumption or production. Suppose that B’s consumption of Y had a positive effect upon A’s utility, and that the use of K by firm X adversely affects the output of firm Y. Show how the utility and production functions would need to be amended to take account of these effects.

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Natural Resource And Environmental Economics

ISBN: 9780321417534

4th Edition

Authors: Roger Perman, Yue Ma, Michael Common, David Maddison, James McGilvray

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