Positive externalities

POSITIVE EXTERNALITY OF CONSUMPTION

Definition - external benefits to third parties caused by the consumption of a product.

Examples;

• Healthy food

• Education

• Vaccines

• Gym membership

• Healthcare

• Charity products

Diagram:

Figure 1 shows the positive externality of consumption in the healthy foods market with price on the y-axis and quantity on the x -axis. The free market equilibrium is where MPB=MPC (D=S) and quantity Q of healthy foods is bought and sold at price P. The consumption of healthy

POSITIVE EXTERNALITY OF PRODUCTION

Diagram - external benefits to third parties caused by the production of a product.

Example;

• Technology

• Recycled production

• Infrastructure/transport

Diagram: