ECON 102 Lecture Notes - Lecture 20: Deadweight Loss, Coase Theorem, Externality

• School: University of Illinois
• Department: Economics
• Course: ECON 102
• Professor: Isaac Dilanni

Document Summary

Econ 102 - lecture 20 - transaction costs and income. Coase theorem- with clearly defined and enforced property rights, in the absence of transaction costs, all externalities will be eliminated through negotiations. I pay you, i don"t pay you. Market failure theory- theory that on the free market, without government intervention, the market fails to achieve the most efficient outcome. Market process theory- theory that on the free market, without government intervention, entrepreneurs have a profit incentive to eliminate deadweight loss. The profit and loss system connects the values of consumers to the incentives faced by producers. Consumer sovereignty- the power of consumers to decide what gets produced.