ECN 204 Lecture Notes - Lecture 4: Marginal Utility, Market Failure, Excludability
24 Jul 2018
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Producer surplus: difference between the actual price a producer receives and the minimum price they would accept, extra benefit from receiving a higher price. Public goods: private goods characteristics, produced in the market by firms, offered for sale, rivalry, excludability, provided by government, offered for free, non-rivalry, non-excludability, free-rider problem. Cost-benefit analysis: cost, resources diverted from private good production, private goods that will not be produced, benefit, the extra satisfaction from the output of more public goods. Quasi-public goods: could be provided through the market system, because of positive externalities the government provides them, examples: education, streets, libraries. The reallocation process: government, taxes individuals and businesses, takes the money and spends on production of public goods. Externalities: a cost or benefit accruing to a third party external to the transaction, positive externalities, too little is produced, demand-side market failures, negative externalities, too much is produced, supply-side market failures.
