Negative externalities

Neg. Externalities-this occurs when production and/or consumption impose external costs on third parties outside the market for which no appropriate compensation is paid

Negative production externalities examples

• Air pollution from factories

• Noise pollution from the airline industry

• Methane emissions

Negative consumption externalities examples

• fly-tipping of house waste

• Alcohol addiction

• Vehicle pollution

  

MSC (Marginal Social Cost): The total cost to society of producing one more unit of a good, including both the internal costs and any external costs to others.

MPC (Marginal Private Cost): The cost to a producer for producing one more unit of a good, not including external costs.

MPB (Marginal Private Benefit): The benefit received by a consumer for consuming one more unit of a good, not including any external benefits to others.

MSB (Marginal Social Benefit): The total benefit to society from consuming one more unit of a good, including both the private benefits and any external benefits to others.

Social welfare loss- This is where the market output supplied is higher than the social optimum