BA_315_LN_9_Government_Interventions

BA_315_LN_9_Government_Interventions - GOVERNMENT...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
GOVERNMENT INTERVENTION Lecture Notes #9 BA 315: Economy, Industry, and Competitive Analysis Source: Schiller Chapter 9 Edited by: Ali Emami Department of Finance Charles H. Lundquist College of Business University of Oregon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This lecture focuses on government interventions in the market economy for correcting market failures. Since the output produced by unregulated markets might not be the best mixed of output for the society, government interventions are necessary to improve market outcomes. The lecture attempts to provide answers for the following questions: 1. Under what circumstances do markets fail? 2. How can government intervention help? 3. How much government intervention is desirable? Concepts you will learn Optimal mix of output Private costs Market mechanism Emission charge Market failure Market power Public good Antitrust Private good Transfer payment Free rider Government failure Externalities Social costs Lecture Outline I. Market Failure A. Optimal Mix of Output f Definition: Optimal Mix of Output The most desirable combination of output attainable with existing resources, technology and social values. B. The Nature of Market Failure 1. Market mechanism f Definition: Market mechanism - The use of market prices and sales to signal desired outputs (or resource allocations). 2. Market failure - (Figure 9.1) f Definition: Market failure - An imperfection in the market mechanism that prevents optimal outcomes. (Figure 9.1) a. Market failure implies that forces of supply and demand have not led to best point on the production possibilities curve. b. Establishes basis for government intervention. C. Sources of Market Failure 1. Public goods
Background image of page 2
2. Externalities 3. Market power 4. Equity Considerations II. Public Goods A. Joint Consumption 1. Public good f Definition: Public Good - A good or service whose consumption by one person does not exclude consumption by others. Example: National defense, flood control dams, radio and television signals. 2. Private good f Definition: Private Good - A good or service whose consumption by one person excludes consumption by others. Example
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/22/2008 for the course ECON 315 taught by Professor Aliemami during the Spring '08 term at Oregon.

Page1 / 7

BA_315_LN_9_Government_Interventions - GOVERNMENT...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online