Digitally summarized economics notes for economics 114.
* Please note that if the display example seems smaller than A4, the downloaded version will not be like this - it will be full-sized.
UNIT 12: MARKETS, EFFICIENCY AND
* video 1 : Unit 12 PUBLIC POLICY
The market
largest cooperative project human
◦
the market may present the in
history
•
it is a fine-tuned machine that sends messages about the scarcity of
goods (
nobody controls it)
•
institutions matter
•
when firms have the power to set prices markets fail to maximize the total surplus : Pareto inefficient
,
•
when firms operate in perfect competition markets maximize the total surplus
,
in this unit, it shows that even competitive markets fail when market transactions impact others
•
market failure
Example : antibiotic resistance
overuse and misuse of antibiotics is a social dilemma
benefits the buyer and seller but the impact of their actions overlooked
every purchase ,
on others is
this is a market failure as the competitive produces much antibiotics
equilibrium
,
too
•
outcome is a Nash equilibrium
•
outcome is Pareto inefficient
* Another example of market failure is pollution
market failure occurs when people do not account for the costs of their decisions on others .
For markets to work well
,
institutions must :
•
protect property rights
•
enforce contracts
antibiotic effectiveness and and sold
Goods like clean water are not easily bought .
* There are no
property rights or contracts for external costs or benefits ,
leading to Pareto -
inefficient outcomes .
, Externalities
An externality of a choice is a cost or benefit imposed on a person who does not
play any
role in the choice
•
external costs and benefits are also known as external economies and dis economies
•
external effects are ignored by the agent making the choice as they do not affect the agent
,
Global negative externality
Global
warming
•
eaternat costs
marginal private cost ( MPC)
the cost for the producer of producing an additional unit of a
good ,
not taking into account
any
costs its production imposes on others leg .
Mc of producing bananas for growers]
marginal external cost ( MEC )
the cost of producing an additional unit of a good that is incurred by anyone other than the
the producer of the good leg .
Mc of banana growers on fishermen cost of harm on fish )
marginal social cost
sum of the private and external costs
MSC = MPC +
MEC
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller miaolivier16. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £2.82. You're not tied to anything after your purchase.
