ECN 104 Chapter Notes - Chapter 4: Fossil-Fuel Power Station, Market Failure, Economic Surplus

• School: Ryerson University
• Department: Economics
• Course: ECN 104
• Professor: Mikhail Gurvits

Document Summary

A demand-side (cid:373)a(cid:396)ket failu(cid:396)e happe(cid:374)s (cid:449)he(cid:374) de(cid:373)a(cid:374)d (cid:272)u(cid:396)(cid:448)es do (cid:374)ot (cid:396)efle(cid:272)t (cid:272)o(cid:374)su(cid:373)e(cid:396)s" full willingness to pay for a good or service. P(cid:396)i(cid:448)ate fi(cid:396)(cid:373)s a(cid:396)e u(cid:374)(cid:449)illi(cid:374)g to p(cid:396)odu(cid:272)e outdoo(cid:396) fi(cid:396)e(cid:449)o(cid:396)ks displa(cid:455)s (cid:271)e(cid:272)ause people do(cid:374)"t have to pay to see them. A supply-side market failure occurs when supply curves do not reflect the full cost of producing a good or service. arise in situations in which a firm does not have to pay the full cost of producing its output. Eg coal power plant not having to pay the environmental costs arises because it is not possible for the market to correctly weigh costs and benefits in a situation in which some of the costs are completely unaccounted for. The coal-burning power plant produces more electricity and generates more pollution than it would if it had to pay for each ton of smoke that it released into the atmosphere.