Economics 3220 Lecture Notes - Economic Equilibrium, Aggregate Demand, Public Good
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Answer: social equilibrium is where msb=msc giving q* (socially efficient, market equilibrium is where mpb=mpc giving qm (market output, since qm > q* we see that unregulated market produced too much output. Nssm= tsb-tsc= a+b+c-h: dwl= area h for producing more output then socially efficient level. Answer: social equilibrium is where msb=msc giving q, market equilibrium is where mpb+ mpc giving qm, since qm > q* we see that unregulated market produces too much output. Nss* = a+b+c: at market output. Nssm= tsb-tsc= a+b+c-j: swl= area j for producing more output than the socially efficient level. Environmental quality, as opposed to pollution can be viewed as public goods. Public goods have two characteristics: non-exclusive. Can"t exclude anybody from using it even if someone does not pay: non-rivalries". One person"s use can not diminish its availability for others. Aggregate demand curve for private food is derived from the horizontal summation of two or more individuals" demand curves at each price.
