Externalities, Market Failures, and Public Policy Explained — Pigovian Taxes, Coase Theorem, and Pollution Permits | Chapter 10 of Principles of Microeconomics
Externalities, Market Failures, and Public Policy Explained — Pigovian Taxes, Coase Theorem, and Pollution Permits | Chapter 10 of Principles of Microeconomics Why do markets sometimes fail to allocate resources efficiently, and what can governments do about it? Chapter 10 of Principles of Microeconomics delves into the concept of externalities —the side effects of market transactions that affect bystanders and can lead to economic inefficiency. This summary explores both negative and positive externalities, introduces solutions like Pigovian taxes and tradable pollution permits, and discusses when government intervention is necessary. 🎥 Watch the full chapter summary below and subscribe to Last Minute Lecture for more textbook breakdowns and academic study guides! Understanding Externalities: Negative and Positive Effects An externality occurs when a market transaction affects someone not directly involved in the transaction. Negative externalities (like p...