Chapter 2 Total willingness to pay is area under demand curve. 2.3 in text. Marginal opportunity costs or supply curve.
Total cost is the area under the supply curve.
Figure 2.4 in text. Discounting is used to find the present value of a future value. The process of dividing by one plus the interest rate to some power is called discounting. Benefit-cost analysis is a process where discounted future benefits of a project are compared to discounted future costs to see if the project is worthwhile. We will discuss the advantages and disadvantages of this approach and how it has been misused at a later point.