ECON 2106 Lecture Notes - Lecture 6: Deadweight Loss, Club Good, Coase Theorem
18 Apr 2018
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Chapter 7: market inefficiencies: what are externalities and how do they affect markets, externalities the costs or benefits of a market activity that affect a third party. Think about uga"s athletics the goal of the teams is to be competitive in their perspective sport. Shortages and surpluses are types of market failure: under-allocation and over-allocation respectively. Internal costs costs when there is an inefficient allocation of resources in a market: under-allocation and over-allocation respectively. Internal costs costs a market activity paid only by an individual participant: think prices of required materials for production and in consumption of a good. External costs costs of a market activity imposed on people who are not participants in that market: fayetteville, ar, has bikers, blues, and bbq. This massive meeting of bikers from around the country causes major traffic congestions (a negative externality) that impacts the local residents ability to get around.
