EC 201 Lecture Notes - Lecture 9: Coase Theorem, Avoidance Speech, Clean Technology
Document Summary
In competitive markets, underproduction or overproduction arise when there are: price and quantity regulations, taxes and subsidies, externalities, public goods and common resources, monopoly, high transaction costs. If eb = 0 and ec = 0, there is no difference between private/ social, or costs/benefits, and we know the equilibrium outcome will maximize social surplus. Pigovian tax: named for arthur pigou (1877 1959, with a tax, consumer is paying true social cost of another good, many taxes in real life are pigovian taxes. Education: education is a great example of a good with a positive externality, you get benefit from this course, but so does society as you all will now know how to solve problems like an economist. If the government pays the producer an amount equal to the marginal external benefit, the quantity produced is different. 4: a voucher is a token that the government provides to households, which they can use to buy specified goods or services.
