uppose that we are considering the market for windmills. The private demand for electric cars is given buy: Qd = 160 − 2? And the private supply of electric cars is given by: Qs = p − 20 Suppose also that electrci cars produce a positive externality, with a Marginal Economic Benefit of $30 per unit. 5. What would be the private market equilibrium (p* & Q*)? 6. What is the socially optimal equilibrium (p* & Q*)? 7. What is Producer Surplus and Consumer Surplus in the private market equilibrium? 8. What is the increase in Total Surplus from moving from the private market equilibrium to the socially optimal equilibrium?
uppose that we are considering the market for windmills. The private
given buy:
Qd = 160 − 2?
And the private supply of electric cars is given by:
Qs = p − 20
Suppose also that electrci cars produce a positive externality, with a Marginal Economic Benefit of
$30 per unit.
5. What would be the private
6. What is the socially optimal equilibrium (p* & Q*)?
7. What is
8. What is the increase in Total Surplus from moving from the private market equilibrium
to the socially optimal equilibrium?
Positive externality refers to the positive spillover benefits of the good to the third party which is not the part of the consumption and production.
At market equilibrium, demand=supply
At socially optimum, social demand= social supply
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