Chapter 10

Chapter 10 talked all about externalities. In a two party market the invisible hand moves the price to an efficient price. However a third party can be involved when there are external effects of the market. In that case the invisible hand can no longer move the price to make the market efficient because it is not taking into account the well being of a third party. To solve the problems of externalities parties can meet an agreement to fix the situation. However if they cant the government must step in to solve the problem through corrective taxes or tradable permits. I would give this chapter a 2/3 for difficulty. We talked about externalities previously and I understood the basic concept, but once they added the new line of the demand and supply graphs I became confused.