Question

Define the following terms in Cost Benefit Analysis:

1: non-market good

2: revealed preference approach

3: hedonic pricing

4: external validity

5: public good

Answer 1

1. Non market goods :-

• The non market goods are the specific goods that are not actually traded in the markets but provide enough benefits to the people.
• These goods does not have any market value and hence does not have any prices associated with them.
• For example :- air, water, wildlife etc.

2. Revealed preference approach :-

• Revealed preference approach is an approach of analysing the various choices of customer's based on their preferences or buying nature.
• This approach does not require a customer to provide information about himself rather it analyses his buying pattern's, price selection pattern's, market behaviour etc which helps in creating his indifference map.

3. Hedonic pricing :-

• Hedonic pricing is a model or a method of pricing and it is based on the principle that the prices of goods are determined by some external and internal factor's which can alter them at some point of time.
• This method of pricing is usually used in housing market, in which the house price's are determined by different external factors.

4. External validity :-

• External validity specifics how well we can apply the datas, theories and results of scientific studies of one thing on different populations , at different places and at different times.
• It is related to generalization and it refers to the generalization of research results beyond a sample group.

5. Public good :-

• Public goods are those goods that are provided to all the members of a society and it is non excludable and non rival.
• They are the goods whose consumption by one does not reduce the amount to be consumed by other's.
• They are called non excludable as the individuaIs cannot be effectively excluded from its use.
• For example:- streetlights, public park's.