ECON 2000 1st Edition Lecture 21Outline of Last Lecture XX. Factors of market failuresa. Purely private good/servicesb. Private goods/ services with significant externalitiesc. Public goods/ serviceXXI. Externalitiesa. Private Benefit Demandb. Social Benefit Demandc. Private Cost Supplyd. Social Cost Supplye. Privatef. Publicg. 3 steps in solving Externality problemsOutline of Current LectureXXII. Externality hands ona. Exampleb. Graphc. Solutions?d. ValuesCurrent LectureXXII. Externality hands ona. Examplei. Externality: Traffic congestionii. Negative or Positive: Negativeiii. Why? – lost time/ lost production, pollutioniv. Demand or Supply? Demandv. Why? Demand is causing the externality (the driver)These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.b. Graphi. If the externality is created on the demand side, the supply curves will always be the sameii. If the externality is created on the supply side, the demand curves will always be the sameiii. If we (demand) thought of the externality instead of just thinking about ourselves, people would be less likely to drive a lot, bringingthe demand curve to the left. c. Solutions?i. If consumers had to pay $14/ day, they would buy/ drive less cars1. Change in price of related goods and servicesa. Causes the private benefit demand for cars to decreasi. Causes Qe to go downd. Valuesi. Should they charge $14/day1. Yesa. Concerned about pollutionb. Gov can uses taxes for other projectsc. Econ growth2. Noa. Harms low income consumersi. Equality of opportunityb. Over Population of public transporti. Comfort3. Othera. Govt should lower fees on public transportation or create opportunities for public transportation besides putting a driving fee on
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