ECON 200 Chapter Notes - Chapter 18: Influenza Vaccine, Coase Theorem, Economic Equilibrium
10 Apr 2016
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Document Summary
Private cost: a cost that falls directly on an economic decision maker: ex: driver- gasoline and road tolls. External cost: a cost imposed without compensation on someone other than the person who caused it: ex: pollution. Social cost: the entire cost of a decision, including both private costs and any external costs: ex: at a party- private costs are food, drink and cleanup, external costs are annoyance felt by neighbors. Private benefits: a benefit that accrues directly to the decision maker: ex: tidying your yard and painting your house: aesthetic pleasure, prettier house, and value of property increases. External benefit: a benefit that accrues without compensation to someone other than the person who caused it: ex: neighbors live in a nicer looking area, value of their properties may increase a bit. Externality: a cost or benefit imposed without compensation on someone other than the person who caused it; one of the most common causes of market failure.
