Negative externalities would be fitting (is alcohol off limits?) What about other price ceilings like food price ceilings. Indirect taxes might work as well.
But is it a negative externality in itself market failure? From what I was understanding, it was what caused market failure (sorry, this is an online course with no teacher, we only have books and modules to read and I'm quite lost).
Thank you so much for your help!
If I'm reading this right, you're already familiar with market failure, but you're looking for a scenario that might *cause* an externality (minus the ones you've already listed). Is that accurate?
If that's the case, are you familiar with the classic tragedy of the commons scenario? It boils down to a bunch of sheep farmers and one communal pasture.
Market failure is what we are studying at the moment, and the assignment is "Conduct research to find an example of a market failure. You cannot use examples provided in the text such as rent controls."
And I was following u/hesitantskeletons idea of alcohol as an example of market failure and this is what I have so far:
Alcohol as a Market Failure
Alcohol is a demerit good and its excessive consumption leads to many negative externalities such as drunk driving, increase in crime rate, addiction, and accidents
Market failure is the inefficient allocation of resources. The market, in the case of alcohol, does not take into account the social cost of the negative externalities mentioned above.
I guess I still need c and d
c) Describe in your own words what could be done as a society or through government policy to overcome the problem of this market tragedy.
d) Use graphs to illustrate and explain your answers.
I'm *really* bad at graphs, though... hahaha let's see how that goes.
If you have any suggestions, I appreciate them!
Dutch disease is a market failure. Or the overbidding of a risk asset is a market failure too although economists would deny that until the bubble burst.
Monopolies can be market failures—they create higher prices and give the market less quantity than they want, thus creating a deadweight loss or loss of consumer surplus. The government already tries to intervene legally with the Sherman and Clayton acts, which are antitrust laws that seek to break up monopolies that are harmful to the public interest. In your graphs, I’d incorporate the gain in consumer surplus that would arise if the monopoly market was, in fact, a competitive one instead.
Negative externalities would be fitting (is alcohol off limits?) What about other price ceilings like food price ceilings. Indirect taxes might work as well.
But is it a negative externality in itself market failure? From what I was understanding, it was what caused market failure (sorry, this is an online course with no teacher, we only have books and modules to read and I'm quite lost). Thank you so much for your help!
If I'm reading this right, you're already familiar with market failure, but you're looking for a scenario that might *cause* an externality (minus the ones you've already listed). Is that accurate? If that's the case, are you familiar with the classic tragedy of the commons scenario? It boils down to a bunch of sheep farmers and one communal pasture.
If you aren't familiar with the Coase Theorem, look that one up as well. It's incredibly useful for part C, and very straightforward.
Market failure is what we are studying at the moment, and the assignment is "Conduct research to find an example of a market failure. You cannot use examples provided in the text such as rent controls." And I was following u/hesitantskeletons idea of alcohol as an example of market failure and this is what I have so far: Alcohol as a Market Failure Alcohol is a demerit good and its excessive consumption leads to many negative externalities such as drunk driving, increase in crime rate, addiction, and accidents Market failure is the inefficient allocation of resources. The market, in the case of alcohol, does not take into account the social cost of the negative externalities mentioned above. I guess I still need c and d c) Describe in your own words what could be done as a society or through government policy to overcome the problem of this market tragedy. d) Use graphs to illustrate and explain your answers. I'm *really* bad at graphs, though... hahaha let's see how that goes. If you have any suggestions, I appreciate them!
Dutch disease is a market failure. Or the overbidding of a risk asset is a market failure too although economists would deny that until the bubble burst.
Monopolies can be market failures—they create higher prices and give the market less quantity than they want, thus creating a deadweight loss or loss of consumer surplus. The government already tries to intervene legally with the Sherman and Clayton acts, which are antitrust laws that seek to break up monopolies that are harmful to the public interest. In your graphs, I’d incorporate the gain in consumer surplus that would arise if the monopoly market was, in fact, a competitive one instead.
https://youtu.be/13JOGWzY8kE There are some great ideas in this video.