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Abstract

Monetary measures of the individual's welfare arising from commodity price changes as approximated by areas beneath estimatible demand equation systems have been rigorously developed in the literature. However, although similar welfare measures associated with changes in (environmental) quality have been rigorously developed (Maler), their applicability to estimatible demand systems has been limited. The present paper attempts to develop a rigorously justifiable measure of individual benefits by which policy-induced environmental quality changes for an interrelated set of commodities can be practically evaluated from potentially estimatible demand functions. This benefit measure is then applied to the special case of a system of commodity demand equations linear in both prices and qualities.

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