EC120 Lecture Notes - Lecture 2: Overgrazing, Market Failure, Externality
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We consume many goods without paying: parks, national defense, clean air & When goods are free, the private market may fail to provide the socially efficient. One of the ten principles from chapter 1: governments can sometimes improve water. quantity market outcomes. Excludable: when a person can be prevented from using the good (fish tacos vs. radio signals); you cannot have any unless you buy it (only some people can use it) A good is rival in consumption if one person"s use of it diminishes others" use. Private goods are excludable and rival in consumption markets work best for these goods. Not a rival in consumption: you using it does not affect others" use of it. Non-excludable; something of value has no price attached to it. Private decisions about consumption & production can lead to inefficiency. Role of government: public policy can raise economic well-being.