Saturday, August 08, 2009

Unit 1: Negative externalities associated with drunkeness

Two sobering videos from the BBC

http://news.bbc.co.uk/panorama/hi/front_page/newsid_8190000/8190335.stm
http://news.bbc.co.uk/1/hi/uk/8192652.stm

a) Who were the 2 parties involved in the economic transaction that resulted in this injury?
b) What is a negative externality/external cost?
c) List all the negative externalities resulting from that transaction that you see in the clip
d) Why are these things negative externalities?
e) What other negative externalities would arise from this assault/injury that are not mentioned in the clip?
f) To what extent do you think the solutions suggested in the second video are likely to be successful in reducing the market failure?

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