Why the absence of property rights leads to externalities in both production and consumption and hence market failure
When nobody owns a resource, producers and consumers can use it freely without paying for any damage they cause. This means costs fall on others, creating externalities and market failure.
Real World
No one owns the Amazon rainforest in its entirety, so logging companies clear land without paying for the carbon emissions and biodiversity loss imposed on the rest of the world.
Exam Focus
Link absent property rights explicitly to externalities: with no owner to compensate, external costs are not internalised, so the market price understates true social cost.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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