ECO105Y1 Lecture Notes - Lecture 13: Market Price, Market Clearing, Social Cost
Document Summary
When there are negative externalities, smart private choices (using keys. 1 & 2) are different from smart social choices (keys 1,2 & 3) Positive externalities (external benefits): benefits to society from our private choice that affect others, but that others do not pay you for. [social benefits = private benefits + external benefits] *without property rights, there is no way for you to claim title to the cleaner you have helped create, so there is no way to be paid for your contribution to a greener planet* Economists conclude, some level of pollution is efficient which means there is a smart choice that balances the benefits of a higher standard of living against the costs of the associated levels of pollution. As we reduce pollution, efficient pollution balances additional environmental benefits with additional opportunity costs of reduced living standards. The rule for a smart choice is: choose the quantity of output where.
