Econ 201, week 7
Econ 201, week 7 ECN 201 (Professor Colleen Scott)
Popular in Introductory Microeconomics
ECN 201 (Professor Colleen Scott)
verified elite notetaker
Popular in Economcs
This 1 page Class Notes was uploaded by Thanh Notetaker on Sunday March 20, 2016. The Class Notes belongs to ECN 201 (Professor Colleen Scott) at La Salle University taught by Colleen Scott in Spring 2016. Since its upload, it has received 14 views. For similar materials see Introductory Microeconomics in Economcs at La Salle University.
Reviews for Econ 201, week 7
Report this Material
What is Karma?
Karma is the currency of StudySoup.
Date Created: 03/20/16
ECON 201. Week Seven (March 17 note)h One of the Ten Principles from Chapter 1: Markets are usually a good way to organize economy activity. In absence of market failures, the competitive market outcome is efficient, maximizes total surplus. One type of market failure: 1) Externality: the uncompensated impact of one person’s actions on the well-being of a bystander. Externalities can be negative or positive, depending on whether impact on bystander is adverse or beneficial. Examples: Air pollution from a factory The neighbor’s barking dog Late-night stereo blasting from the dorm room next to yours Internalizing the externality: altering incentives so that people take account of the external effects of their actions Effects of Externalities: If negative externality: market quantity larger than socially desirable If positive externality: market quantity smaller than socially desirable To remedy the problem, “internalize the externality” tax goods with negative externalities subsidize goods with positive externalities Public policies towards externalities: Two approaches: Command-and-control policies regulate behavior directly. Examples: limits on quantity of pollution emitted requirements that firms adopt a particular technology to reduce emissions Market-based policies provide incentives so that private decision-makers will choose to solve the problem on their own. Examples: corrective taxes and subsidies tradable pollution permits