ECON 101 Lecture Notes - Lecture 26: Influenza Vaccine, Wheellock, Allocative Efficiency
Document Summary
When the consumption of a good impacts a third party. Steering wheel lock tracking device with sticker invisible tracker with no sticker. Should government subsidize one of the above devices. Do other car owners benefit if the driver installs the device. Steering lock and tracking device with sticker negative externality. Thieves know they"re more likely to be caught but don"t know which car is more likely to get them caught saves other cars. Draw diagram and note that subsidy to dd causes dd to shift upward increasing price and quantity. Most goods: social cost = private cost. Too much consumption/production of negative and not enough positive. Consumption of alcohol adversely affects third parties through drinking and driving. Social value of alcohol consumed = private value value of externality. Production of alcohol does not have an externality only consumption. To achieve efficiency government imposes a tax on the consumer.
