ECO 1104 Chapter Notes - Chapter 10: Economic Equilibrium, Industrial Policy, Demand Curve
23 views3 pages
8 Dec 2016
School
Department
Course
Professor
3363410481 and 38221 others unlocked
16
ECO 1104 Full Course Notes
Verified Note
16 documents
Document Summary
Negative externality: adverse impact on the bystander. Positive externality: beneficial impact on the bystander. Social cost: includes private costs of producers plus cost to bystanders. Social cost curve: above the supply curve (private cost curve) Difference between supply curve and social cost curve= cost of externality. New equilibrium: intersection of demand curve and social cost cost (optimal) Optimal amount of production for society as a whole. Deadweight loss: the amount of production lost (h) Consumer surplus: area between demand curve and equilibrium price (a+b+c+d) Producer surplus: amount received by sellers- the social cost to society (e+f+g)-(f+g+b+c+h) Internalizing the externality: alter incentives to that people take account of external effects of their actions. Negative externalities lead markets to produce a larger quantity than is socially desirable. Difference between demand curve and social value curve= value of externality. New equilibrium: intersection of social-value curve and supply curve. To increase demand to meet social value curve, the government introduces subsidies.
Get access
Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers