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Abstract

This paper provides an introduction to benefit-cost analysis of projects with price effects, intended for use in teaching. The impact of price changes on consumers' and producers' surplus under competitive market assumptions is presented graphically with linked numerical examples. The effect of demand and supply shifts on social surplus is then discussed, distinguishing the shift effect holding price constant from the price effects themselves. The distribution of gains and losses to consumers and producers is also evaluated. The analysis is then extended to include distortions such as price supports and ceiling prices. Applications to the evaluation of agricultural research impacts are then introduced, drawing on recent literature. An illustrative exercise based on maize research in Zambia is included.

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