GWLecture15

GWLecture15 - Part IIa: Paper 1 General Equilibrium and...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Part IIa: Paper 1 General Equilibrium and Welfare Economics Dr Sönje Reiche
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Outline Externalities Books: Cowell: Ch. 9.3.3, 13.4-13.6 Varian: Ch. 34, 36.9-36.10
Background image of page 2
3 Externalities Third party effects Inefficiency because the parties involved in the transaction do not take account of the third party Example 1: price of oil rises, switch to fuel efficient car but price of car has gone up because others have also switched Example 2: price of oil rises, switch to public transport, but this is congested by others who have also switched Pecuniary externality : third party affected only through effect on the price Technological externality : third party affected directly (eg directly in utility function, or directly in production function)
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4 Example 2 Traffic Jams Assume there are N commuters with a choice of train or car Travel by train takes 40 minutes The travel time by car increases as the number of car users increases Commuters make the choice which minimizes their personal travel time
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/07/2012 for the course ECON 201 taught by Professor Cowell during the Spring '10 term at LSE.

Page1 / 14

GWLecture15 - Part IIa: Paper 1 General Equilibrium and...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online