ECON 1B03 Study Guide - Final Guide: Only Time, Penicillin, Cost

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Aleksandra Gajic

Document Summary

Demand curve reflects the value that consumers place on a certain product. Supply curve reflects cost of producing that particular good for producers = private costs. Free market brings demand and supply into balance (where govt doesn"t intervene) When market equilib isn"t the right one govt has to intervene. Steel market - pollution negatively affects society by causing health problem, cancer, etc. These are social costs of steel production that are not accounted for; health expenses are not accounted for. Firm only cares about how much it costs to produce steel. This q market is not the proper amount, it"s not what society desires, must include the social cost. Steel factories emit pollution: cost to society of producing steel is larger than the private costs of producers. The social costs include: private costs of producers + cost to public adversely affected by pollution. Firm wants to produce less at every price level because its more expensive to produce.