ppt课件-externalities-theuniversityofnorthcarolinaatchapelhill.pptVIP

Externalities Econ 10 Holmes Big Idea External economies Key features People do not incorporate the external costs (if negative) or external benefits (if positive) of the good. Thus, social welfare is not maximized when individuals make their own decisions. Examples Pollution: firms “make too much” [Gary] Noise: w/out quiet hours, neighbors of MOD might never sleep Cigarettes: I lose my voice when you smoke etc. Public Goods A continuum Negative Externality Practice Problem Table Graph of example How can we get the ME to the SO? What about a positive externality? Graph: positive Table: Positive Graph:Positive How do we convince private agents to act in public interest? Practice Problems PP, continued * Test volume So far: non-shareable goods only Hamburgers, T-shirts, etc. You are studying for big test and your roomie listens to “Hate Tank” by Method of Destruction. How much quality studying will you get done? You get the idea... When the consumption of a good affects people other than those consuming it, then we say that the good has “externalities” (or spillover effects). In this case, your roomie’s “music” affects your ability to study. (Compare with your roomie eating a hamburger-you are not affected). Note not necessarily negative: suppose neighbors like my roses. Suppose you have a good that people cannot be prevented from enjoying consumption by one does not affect others’ consumption Examples: public park, fireworks, concert in Central Park, etc. How much can seller get? (How much would you pay to watch the sunset?) A: nothing. These are called public goods. Nonexcludability Nondepletability Circus with a tent: private (excludable) Circus without a tent: public (nonexcludable) [Wrigley Field] Private Goods (all to consumer) Public Goods (benefit to all) Hamburgers Massages Education National Defense Fire Department Education: higher wage, enjoy learning (ha!) more educated populace, more productive Most goods lie somewhere in between... Steel P Q M