Externalities and Cost of Production in Economics - Part 1

Learn about market externalities and their impact on economic efficiency in this economics lecture from NPTEL's Principles of Economics series. Explore how costs and benefits affecting external parties can lead to market failures where social welfare is not maximized. Examine the critical role of property rights in addressing externalities through the lens of the Coase Theorem, which proposes that private negotiations can resolve external costs when transaction barriers are low. Follow along with a practical example involving upstream and downstream firms to understand how property right assignments influence pollution levels and benefit distribution. Gain insights applicable to course credit certification through NPTEL's UGC and AICTE-approved program.