ABSTRACT
The calculation of vbt presents no problem, at least in so far as the goods produced by the project are marketable. In the earlier chapters in Part II, we perforce had to adopt, as an adequate measure of consumer surplus, the area under the demand curve for a good x less the amount the consumers have to pay for the amount, OQ, they buy. Thus, the full valuation for the total value OQ amount of x is the area under the demand curve (without any subtraction of the sum paid by the consumers). And it is from this valuation vbt of the benefit of the project’s output of the good x that we now have to subtract the real cost, the vct . In a cost-benefit calculation, however, costs are not, in general, equal to the
costs of the materials and productive factors used by the project in the ordinary sense; say, as they would be calculated by a private enterprise from their market prices. The relevant costs in a CBA are what are known as ‘opportunity’ costs – a term which serves to indicate the valuations forgone when the materials or factors are transferred from other employments.
