Question

plz answer this question, urgent

Answer 1

Willingness to pay:

Willingness to pay is the maximum amount that Person A would pay for the right to anything related to environment. Person A will not allow Person B to degrade anything till Person B pays him enough money to offset the intrusion.

Advantages of using willingness to pay:

• Willingness to pay is preferred when price of something is known or even unknown, such as noise pollution.

• People can increase their demand based on the willingness to pay for an environmental good under specific circumstances; hence, it increases choice.

• Evaluation of specific characteristics of an environmental good occurs when people are willing to pay for it, such as reasonable amount, newness, and its functions.

• Economic value of the environmental product purchased is justified when people pay by their will.

• If willingness to pay is followed, then people could avoid costs.

Disadvantages of using willingness to pay:

• Willingness to pay would also lead to scenario misspecification.

• Sometime, avoiding cost would reduce the incentives to misrepresent value.

• If willingness to pay exceeds willingness to accept, then the person may lose the social surplus created from the goods traded.

Alternatives of willingness to pay:

Choice modeling approach would be the best alternative for willingness to pay.