gs_-14_--_Social_costs - ANNOUNCEMENT: SCHEDULE OF EXAMS...

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1 ANNOUNCEMENT: ± SCHEDULE OF EXAMS (Tentative): o TEST #1 –– DONE! o TEST #2 –February 5 , 2009 ) . o TEST #3 – first week March, 2009 (TBA). o FINAL EXAM – Announced during FINAL EXAM WEEK Lecture 14 TOPICS: MARKET FAILURE ± MARKET FAILURE ± ANALYSIS AND EXAMPLES ± EXTENSIONS OF MARKET FAILURE: o ECONOMIC DEVELOPMENT AND SOCIAL AND ECONOMIC INSTITUTIONS THE MARKET SOLUTION COULD FAIL! INTRODUCTION TO THE ANALYSIS OF MARKET FAILURE.
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2 WORLD DEBATE : CLIMATE CHANGE AND THE ENVIRONMENT - PREMISES ± SCIENTIFIC STUDIES HAVE SHOWN THAT EARTH’S ATMOSPHERE IS THINNING AT AN ALARMING RATE AS A RESULT OF CARBON EMISSIONS THAT HAVE ACCUMULATED DUE TO THE ECONOMIC ACTIVITY OF NATIONS. ± THE MOST INDUSTRIAL AND POPULOUS COUNTRIES HAVE BEEN THE BIGGEST CONTRIBUTORS TO THIS EMISSION. ± THE EARTH’S ICE CAPS WILL MELT FASTER AND WILL CAUSE A RISE IN SEA LEVELS AND ENORMOUS CLIMATIC DISTURBANCES AMONG COUNTRIES. WORLD DEBATE : THE 2009 COPENHAGEN CONFERENCE ON CLIMATE CHANGE ± OBJECTIVE : TO REACH AGREEMENT ON THE REDUCTION OF CARBON EMISSIONS BY COUNTRIES. ± RESULT . COUNTRIES COULD NOT AGREE ON BINDING TARGETS FOR REDUCTION OF EMISSION. AND SO, THE CONFERENCE FAILED TO ACCOMPLISH ITS OBJECTIVE. WORLD DEBATE : THE COPENHAGEN CONFERENCE ON CLIMATE CHANGE ± WHY ? COUNTRIES THAT CONTRIBUTE TO SIGNIFICANT CARBON EMISSIONS DO NOT WANT TO COMMIT TO HIGH TARGETS FOR REDUCTION. o PRESENT DAY CIVILIZATION IS BASED ON CARBON-BASED TECHNOLOGIES. o SHIFT OF TECHNOLOGICAL BASIS OF PRODUCTION IS A COSTLY PROCESS, IS UNCERTAIN, AND WILL LIKELY TAKE TIME TO MASTER. o COUNTRIES WITH CAPACITY ALTHOUGH HOPEFUL DO NOT WANT TO OVER-COMMIT.
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3 AN EXAMPLE OF MARKET FAILURE EARTH’S CLIMATE CHANGE ISSUES MARKET FAILURE ± The competitive market solution affects all market participants (private economic solution) and also non-participants (society at large) . ± “Externality” Æ Impact of market solution on non-market participants ( social costs ) 1/16/2009 Econ 11 - Lecture #14 9 FOR ALL MARKET PARTICIPANTS – BUYERS AND SELLERS IS THERE ANY IMPACT ON NON-PARTICIPANTS IN THE MARKET? DEFINITION : Non-participants do not buy or sell in this market and are simply “bystanders” in the market activity. P Q COMPETITIVE MARKET SOLUTION
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4 1/16/2009 YES, GOOD! COMPETITIVE MARKET SOLUTION FOR ALL MARKET PARTICIPANTS – BUYERS AND SELLERS NONE: NO MARKET FAILURE (MOST COMMON OUTCOME) YES, BAD! LOWER “SOCIAL COST” HIGHER “SOCIAL COST” P Q IMPACT ON MARKET BY-STANDERS 11 YES, GOOD! P Q COMPETITIVE MARKET SOLUTION FOR ALL PRIVATE MARKET PARTICIPANTS – BUYERS AND SELLERS- NO MARKET FAILURE: SOCIAL COST=PRIVATE COST A BENEFICIAL EXTERNALITY Social Cost Econ 11 - Lecture #14 P Q COMPETITIVE MARKET SOLUTION FOR ALL PRIVATE MARKET PARTICIPANTS – BUYERS AND SELLERS- NO MARKET FAILURE: SOCIAL COST=PRIVATE COST YES, BAD!
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This note was uploaded on 04/18/2010 for the course SE 67256 taught by Professor Dr.gerardosicat during the Spring '10 term at University of the Philippines Diliman.

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gs_-14_--_Social_costs - ANNOUNCEMENT: SCHEDULE OF EXAMS...

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