ECON 314 Lecture Notes - Lecture 15: Urban Air, Externality, Lead
24 Jun 2019
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Document Summary
A commodity or service that is provided without profit to all members of a society, either by the government or a private individual or organization. An entity that provides benefits to all individuals simultaneously and whose enjoyment by one person in no way diminishes that of another. An entity that negatively affects/imposes costs on people simultaneously. These concepts bring about the need for better understanding externalities and internalization. Externalities = economic consequence of commercial/industrial activity (can be positive, but usually viewed as negative because it is a cost) Internalization = ability to pay for negative effects externalities impose on others. Free-rider problem: the situation in which people can secure benefits that someone else pays for. The preservation of trees can help provide clean air, but there are costs and benefits for preserving the trees. At pm, marginal cost (mc) = marginal benefit (mb) Therefore, the public good will be given/produced at q*
