2 types of Market Failure - academic

2 types of Market Failure - academic - 2 types of Market...

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Unformatted text preview: 2 types of Market Failure (require gov’t intervention) (require - Public Goods Public - Externalities Externalities Pure Public Goods Pure Pure Pure public goods are Non-rival: we can use the same we good at the same time w/o lessening its benefit lessening Non-excludable: we cannot be we prevented from using the good or service or Examples of Pure Public Goods Examples A lighthouse National defense A streetlight Other examples? Other Public Goods (not pure) Other Roads Public Schools Freeways Others? Externalities Externalities Can be either NEGATIVE or POSITIVE Both require government intervention to Both solve or lessen the impact of the externality externality NEGATIVE EXTERNALITIES NEGATIVE A third party is harmed by a transaction third harmed occurring between buyer & seller occurring common example pollution!! example Most Most Jeepney Other types of Negative Externalities Externalities Noise Water __________________ __________________ smoke waste Dealing w/ - externalities Dealing Overproduction of goods because true costs are not paid true could tax the negative tax externality OR externality or restrict the good/service restrict Gov’t Gov’t Ban Positive Externalities Positive Third Third parties are benefitted by a benefitted transaction between buyer & seller transaction Classic example vaccinations Classic Another classic example education – Another if the + externalities are massive, then gov’t typically offers as a PUBLIC GOOD GOOD My example My Solutions to + externalities Solutions + externalities are underproduced externalities underproduced could subsidize producers subsidize Gov’t Gov’t OR OR Gov’t Gov’t could subsidize consumers subsidize ...
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This note was uploaded on 02/14/2011 for the course ECON 2302 taught by Professor Ross during the Spring '09 term at Central Texas College.

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