Positive externalities

Positive externalities -

• This happens when production and/or consumption create third party benefits outside of the market

Positive production example

• Projects to reduce deforestation

• Bee keeping and pollination

Positive consumption example

• Pest control and gardening

• Youth clubs and apprenticeships

The social benefit is higher than the private benefit

A subsidy educes the mpc of consumption and ought to lead to an expansion of demand towards the desired social optimum

Because there are poitive externalites in production, MSC if production is less than the MPC of production