Lec_10_externalities - Mon 4-4:50 PETER 103 Vinayak Alladi...

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1 Ayal Chen-Zion PETER 103 Fri 5-5:50 Soojin Jo PETER 103 Fri 4-4:50 Martha Gimbel PETER 103 Wed 5-5:50 Roy Allen CENTR 222 Wed 3-3:50 Matthew Louie WLH 2204 Mon 10-10:50 Vinayak Alladi PETER 103 Mon 4-4:50 (1) Discussion sections do not meet today. (2) Exams returned in discussion section beginning Friday. (3) Check course web page on Saturday for information about grading scale http://dss.ucsd.edu/~jhamilto/Econ2.html Chapter 11: Externalities and Property Rights A. External costs Definitions • The private costs of an activity are the costs that you personally pay for • The external costs of an activity are negative consequences of that activity for others that you don’t personally pay for •By negative consequence we refer to something they would be willing to pay to prevent if they could Example: driving your car Private costs: • gasoline • wear on car External costs: • traffic congestion • pollution But why is air pollution an “external” cost? What if I care about pollution myself?
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2 • Driving 1 more mile adds 0.1 grams of hydrocarbons to the air • 0.1 grams has a miniscule effect on the air of San Diego • My willingness to pay to have 0.1 fewer grams HC in the air is maybe one-millionth of a cent • So my personal “pollution cost” is one- millionth of a cent • But, if there are 3 million people in San Diego, the external “pollution cost” of driving my car one more mile would be 3 cents
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This note was uploaded on 03/02/2012 for the course ECON 2 taught by Professor Kim during the Fall '08 term at UCSD.

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Lec_10_externalities - Mon 4-4:50 PETER 103 Vinayak Alladi...

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