EC120 Lecture Notes - Lecture 21: Environment And Climate Change Canada, Demand Curve, Economic Surplus
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EC120 Full Course Notes
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Externality: the uncompensated impact of one person"s actions on the well- being of a bystander. Restoration of historic buildings, spending on gardens. Positive externality if resulting knowledge can be used. Many countries have significant gasoline taxes (very inelastic good) Inelastic demand for gasoline (taxes are efficient) Congestion externalities (as more people drive, traffic slows everyone down) More drivers mean more accidents (cots of accidents on bystanders) Gas taxes reduce the use of gasoline. Efficiency when social cost exceeds private cost. Efficiency when social benefit exceeds private benefit. Actions can be limited/promoted by legal requirement. Education is believed to create positive externalities. Government prohibition raises the cost of drunk driving. Children under age 16 must attend school. Required use of catalytic convertors in cars alternatives. Efficient regulation requires extensive knowledge about costs and. Pigouvian taxes: a tax to reduce output with negative externalities. Taxes alter the private use of resources. Taxes and subsidies leave choices in the hands of (informed)
