CEL for Teachers’s Updates

Week 2 - When Pricing Fails - Externalities

Week 2 - When Pricing Fails: Externalities

If the invisible hand/ price mechanism works to allocate resources so well, why do we see exorbitant pricing? Wastage? Shortages?

One way to explain this market failure is to understand that whenever people consume or produce, they could be creating Externalities. So what are Externalities? Where do they lurk? Why do they matter?

        Smoking is one of the most common example of negative externalities. (Altmann, n.d.)

References

Altmann, G. (n.d.). Cigarettes in ashtray. [Photograph]. Pixaby. Retrieved August 1, 2023, from https://pixabay.com/photos/cigarettes-ashtray-ash-smoking-83571/

 

Lesson Objective -

1. Explain what externalities are and how they occur.

2. Define key terms: externality/ external costs/ benefits, indirect tax/ pigouvian tax

3. Reflect: What are the consequences of not paying the true price on goods and services we consume? (Personal Update 2 - 200 words, use terms and concepts learned)

4. Comment on 2 Peers' Updates (75 words using terms and ideas learned)

 

Pre-Session Material (please complete before synchronous sessions)

Take notes and type your wonderings at the end of this pre-session below.


What are the reasons for pricing to fail?

Media embedded August 3, 2023

                                                (Marginal Revolution University, 2015)

How are externatlieis usually corrected? Under what circumstances do they work?

Media embedded August 3, 2023

                                                               (DW News, 2023)

References

DW News. (2023). Indonesia considers sugar tax to tackle diabetes and obesity [Video]. In YouTube. https://www.youtube.com/watch?v=XxsS2MhAnEo

Marginal Revolution University. (2015). An introduction to externalities [Video]. In YouTube. https://www.youtube.com/watch?v=CpVf11f09Pk&list=PL-uRhZ_p-BM5C7RsahR48iVyIG95WFhLl

 

Comment: What new insights did you gain about an economic decision you made this past week?  What is one wondering you have as a result of this week's learning?

 

 

 

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  • Joanne Anderson
  • Joanne Anderson
  • Nina Wakefield
  • Robin Ford Coron
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  • Tammy Cheng
  • Nina Wakefield
  • Kristina Pilgueva