Lecture
This lecture discusses the concepts of market regulation, focusing on tax revenue and external costs. It begins by defining the social willingness to accept (WTA) and its relationship to private costs. The instructor explains how taxes create a wedge between the price buyers pay and the price sellers receive, illustrated with numerical examples. The lecture covers the implications of taxation on supply and demand, emphasizing the effects on equilibrium price and quantity. The relationship between tax revenue and external costs is explored, highlighting how taxes can be used to address market failures. The instructor presents various scenarios to demonstrate the impact of taxes on market behavior, including the calculation of tax revenue based on equilibrium quantity. The discussion also touches on the importance of understanding the social costs associated with market transactions and how they can influence regulatory decisions. Overall, the lecture provides a comprehensive overview of the mechanisms of market regulation through taxation and its effects on economic efficiency.