Explain a positive and negative externality that you have recently consumed. Please relate your answer to the characteristics of elasticity.
Explain a positive and negative externality that you have recently consumed. Please relate your answer to the characteristics of elasticity.
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
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Explain a positive and negative externality that you have recently consumed. Please relate your answer to the characteristics of elasticity.
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- Positive externality- Positive externalities occur when the effects of a decision not taken into account by the decision-maker are beneficial to others. For example, education (especially elementary and secondary education) is generally believed
- We can say that a positive externality is a benefit that is enjoyed by a third-party as a result of an economic transaction. While individuals who benefit from positive externalities without paying are considered to be free-riders, it may be in the interests of society to encourage free-riders to consume goods that generate substantial external benefits.
- We can say that exactly as can be seen, most merit goods generate positive externalities, which beneficiaries do not pay for.
- For example, with healthcare, private treatment for contagious diseases provides a considerable benefit to others, for which they do not pay.
- Similarly, with education, the skills acquired and knowledge learned at university can benefit the wider community in many ways.
- Although, the externality also increases the aggregate cost to the economy and society making it a negative externality. Externalities are negative when the social costs outweigh the private costs.
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