CAS EC 101 Lecture Notes - Lecture 7: Passive Smoking, Beautiful Music, Free Rider Problem

• School: Boston University
• Department: Economics
• Course: CAS EC 101
• Professor: Saponara

Document Summary

Previously, we introduced the idea of externalities, where the social cost/value of individual decisions or actions can di er from the private cost/value of those decisions or actions. That is, an action one person takes can have a negative side- e ect (e. g. , secondhand smoke from cigarettes) or a positive side-e ect (e. g. , playing beautiful music in a public park) on bystanders. Often, these externalities arise when it is unclear who owns or controls a particular resource. Before more directly analyzing these issues, we need some vocabulary for identifying goods and resources where these kinds of issues might be likely to arise: excludability and rivalry. Imagine a cookie from insomnia cookies across from bu. To enjoy a cookie from their shop, you have to pay them for the privilege. They keep the cookies behind the counter and you are not allowed to waltz in and take one they exclude you until you pay the price for a cookie.