Principles of Microeconomics / Unit 12 MIC 1105 short lesson, about 20 seconds
Private Return and Social Return
Captions available
The idea
A firm funds research while the private return covers the cost of borrowing. The social return, private plus spillover, is higher, so society would fund more projects.
In practice
At eight percent interest the firm funds three projects; society would fund five.
Where people slip
Education works the same way: private returns to a degree are positive, social returns higher; hence the subsidy.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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