ECO 1104 Lecture Notes - Lecture 11: Marginal Utility, Collective Ownership, Externality

• School: University of Ottawa
• Department: Economics
• Course: ECO 1104
• Professor: David Gray

Document Summary

Market failure any situation in which unregulated market fails to bring about a socially desirable outcome: competitive markets usually yield desirable outcomes, efficiency, whereby the output level is such that mb = mc. Market failure can justify government intervention (cid:862)left (cid:449)i(cid:374)g(cid:863) people tend to think that markets usually fail, (cid:449)hile (cid:862)right (cid:449)i(cid:374)g(cid:863) people believe the opposite. Rivalry i(cid:374) (cid:272)o(cid:374)su(cid:373)ptio(cid:374): o(cid:374)e perso(cid:374)(cid:859)s (cid:272)o(cid:374)su(cid:373)ptio(cid:374) i(cid:374)fri(cid:374)ges upo(cid:374) so(cid:373)e(cid:271)od(cid:455)(cid:859)s else(cid:859)s (cid:272)o(cid:374)su(cid:373)ptio(cid:374) of the good. Excludability in consumption: it is possible to prevent someone from consuming it. The difference between public goods and private goods lies mostly on the d side as opposed to the s side. The best way to think of them is in contrast to private goods. Public goods are characterized by non-rivalry in consumption. Society consumes public goods jointly: beautiful view, clean environment, highway before the saturation point is reached. Public goods also are characterized by non-excludability in consumption.