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Positive externalities

What are positive externalities (or external benefits)?

Positive externalities may occur in the production and the consumption of a good or service. An
example of an external benefit in production is the recycling of waste materials such as newspapers,
glasses or tins. It has the benefit of reducing…

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The difference between MPB and MSB is private benefits.

External Benefits and the triangle of welfare gain

The free market ignores private externalities. However, adding external benefits on to the
consumption of a good or service, such as the consumption of solar energy, causes the demand curve
to shift right…

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Subsidies

The government often subsidies goods and services which have significant external benefits, such as
education and healthcare. Subsidies may also be given to alternative forms of economic activity
which create less pollution, such as public transport and renewable energy. The effect of a subsidy is
to reduce the price…

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