CHAPTER 5 EXTERNALITIES F11-2

CHAPTER 5 EXTERNALITIES F11-2 - ECON 454 CHAPTER 5...

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1 © Charles R. Hulten 2011 ECON 454 CHAPTER 5 EXTERNALITIES © Charles R. Hulten 2011 OUTLINE OF LECTURE DEFINITION AND TAXONOMY OF EXTERNALITIES CONSUMER AND PRODUCER SURPLUS NUMERICAL EXAMPLE OF POLLUTION SPILLOVER EXTERNALITY VARIOUS REMEDIES COASE AND POLLUTION SWAPS, DATA ON ENERGY © Charles R. Hulten 2011 EXTERNALITY A SITUATION IN WHICH THE ACTIONS OF ONE AGENT AFFECT OTHER AGENTS, BUT THE FORMER HAS NO INCENTIVE OR AWARENESS TO TAKE THE INTERACTION INTO ACCOUNT POSITIVE AND NEGATIVE EXTERNALITIES SPILLOVER EXTERNALITIES OTHER TYPES OF EXTERNALITIES EXTERNALITIES AND PUBLIC GOODS MARKET FAILURE DUE TO EXTERNALITY © Charles R. Hulten 2011 COORDINATION TRAFFIC LIGHTS (CRASH AS SPILLOVER) CURRENCY WEIGHTS AND MEASURES TECHNOLOGY STANDARDS INFORMATION PURE FOOD AND DRUGS FINANCIAL INTERMEDIATION PROPERTY AND PERSONAL RIGHTS LEGAL SYSTEM AND RULE OF LAW ENVIRONMENT PATENTS, COPYRIGHTS, REAL STATE DEEDS PERSONAL RIGHTS AND SAFETY INCREASING RETURNS TO SCALE ECONOMIES OF SCOPE AND SCALE (LOCATION) NETWORK GOODS (SYSTEMS EFFECTS) OTHER TYPES OF EXTERNALITY
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2 © Charles R. Hulten 2011 WILLINGNESS TO PAY: A DOLLAR METRIC OF UTILITY Price Quantity Demand Curve P = 6 - Q 6 6 5 0 1 © Charles R. Hulten 2011 WILLINGNESS TO PAY & THE AREA UNDER THE DEMAND CURVE Price Quantity 6 6 5 0 1 5 4 3 2 4 3 2 1 a b c d e f Willingness-to-Pay unit 1 = a = 5.5 unit 2 = b = 4.5 unit 3 = c = 3.5 unit 4 = d = 2.5 unit 5 = e = 1.5 unit 6 = f = 0.5 Total = ? © Charles R. Hulten 2011 DIMINISHING MRS AND THE DEMAND CURVE X Y 0 A 8 10 +3 +2 6 30 B* 11 M M C -2 -2 6 8 M © Charles R. Hulten 2011 ADD SUPPLY CURVE Price Quantity Demand Curve P = 6 - Q 6 6 0 Supply = MC = 3 3 3
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3 © Charles R. Hulten 2011 CONSUMER SURPLUS ON FIRST UNIT OF THE GOOD Price Quantity Demand Curve P = 6 - Q 6 6 0 1 Supply = MC = 3 3 3
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This note was uploaded on 10/24/2011 for the course ECON 454 taught by Professor Staff during the Spring '08 term at Maryland.

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CHAPTER 5 EXTERNALITIES F11-2 - ECON 454 CHAPTER 5...

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