Metacog question. Two things markets need to work well? Many sellers and
Economists use price--it helps you measure how much people want something.It
gives a common metric to different things so you can compare their value.
Non-market values--an economic value that does not have a functioning market
Use value--use forests for lumber,natural resources
Non-use value--preserving forests for conservation.The is value in keeping a
wildlife refuge unused.People would pay money to make sure something doesn't
First theorem of welfare--no need for govt interference in a private
market.A well functioning market if all the conditions are met,but its rare for all
the conditions to be met.If conditions are not,govt intervention is justiﬁable.
Welfare--for both consumers and producers,focused on the well being of society
Market failure--when markets don't reach maximum efﬁciency.When they're
not using all the resources they can.When markets do not generate as much
welfare as they could,because it doesn't meet some of the conditions
Ways the govt gets involved with markets--creates policies,demanding permits
for companies that produce too much pollution.
Govt can remedy market failures by taxing stuff so people will be less inclined to
Cap and trade
Establish an allowable amount of emissions--a cap.Issue permits to polluters.
Some will have to purchase the "right to pollute" from others
Trade--allows ﬁrms to work it o