negative externalities
- Created by: Sophie v
- Created on: 13-05-21 17:08
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- Negative externalities
- unintended consequences of production and consumption resulting in costs to a third party
- demerit goods
- if left to the free market, would be over-consumed and overprovided.
- Very HIGH negative externalities social cost>social benefit
- both the private and public sector can provide these goods unlike public/private goods
- socially optimum level of output
- refers to the level of output which would result in the best outcome for society
- minimises the negative externalities and maximises the positive externalities
- free market equilibrium. price Private costs= Private benefits
- private costs - cost of production borne by the supplier
- private benefits - value of utility felt by consumer
- negative externaility diagram
- MSC(MPC + external cost
- MPC (Supply curve)
- MPB (Demand curve)
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