EEC5_session3_public_good

EEC5_session3_public_good - Chapter 5 Market Failure:...

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Chapter 5 Market Failure: Public Bads Slides based on Environmental Economics by Charles Kolstad (2000)
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Excludability: --a good is excludable if it is feasible & practical to selectively allow consumers to consume the good . e.g. a car -- a bad is excludable if it is feasible & practical to selectively allow consumers to avoid consumption of the bad . e.g. storing (consuming) garbage. Excludability is important as, to attach a price to the consumption of a good or bad, we have to be able to deny that consumption if the price is not paid. e.g. TV signals (a good ), air pollution (a bad )
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Rivalry: --a good is rival if one person‟s consumption of a unit of the good diminishes the amt available for others to consume e.g. a car -- a bad is rival if one person‟s consumption of a unit of the bad diminishes the amt available for others to consume . e.g. storing (consuming) garbage. Rivalry is important as, there must be a cost associated with incremental use in order for the price a consumer is willing to pay to be non-zero At a price of zero no one would be able to provide the good/bad for consumption. e.g. TV signals (a good ), air pollution (a bad )
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Optimal Provision of Public Goods The conventional approach to demand for goods is, for a given price (MWTP), to sum individual qty demanded to obtain market demand. --horizontal summation of individual (rival
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This note was uploaded on 08/13/2011 for the course ECO 373 taught by Professor Maryamsami during the Summer '11 term at SUNY Stony Brook.

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EEC5_session3_public_good - Chapter 5 Market Failure:...

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