Unit 1: Markets are Efficient, Except . . . Intro to Microeconomics

Lesson 5a: Government Interference in Markets and Market Failures (Negative Externalities)

Something Interesting - Why are we studying this?

Cities, states, and countries are debating whether to add taxes, or raise taxes, on gasoline, soda, and junk food. Why? Why would it be good for society to raise these taxes? Below are a small sample of the many news articles about these taxes Why gasoline prices might be too low: http://www.npr.org/templates/story/story.php?storyId=4858826 Soda Is About To Get Pricier For Another 5 Million Americans [Huffington Post, 1/11/2016 03:12 pm ET, Joseph Erbentraut] http://www.huffingtonpost.com/entry/cook-county-soda-tax_us_58250427e4b0c4b63b0c0fe4 Why Mexico taxes junk food and soda: http://www.politico.com/story/2014/01/mexico-soda-tax-101645 Top Economists Back New Carbon Tax Plan, But It Still Wouldn't Be Enough https://www.huffingtonpost.com/entry/top-economists-back-new-carbon-tax-plan_us_5c40a641e4b0a8dbe16e9075 A Tax on Meat? For Health Reasons https://www.cbsnews.com/news/is-it-time-to-put-a-tax-on-meat/ To Reduce Climate Change https://thehill.com/opinion/energy-environment/458606-meat-is-taxing-the-planet-so-we-should-tax-meat After studying this lesson you should be able to discuss how negative externalities associated with these products are the reasons for such taxes and illustrate the effects of negative externalities on a demand and supply graph. You should understand why many people support these taxes.

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