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Externalities: Chapter 13, BY AIDAN - Coggle Diagram
Externalities: Chapter 13
Negative externalities
Noise pollution
Bad for environment
Air pollution
Bad for environment
Water pollution
Bad for environment
Overcrowding
Bad for the population, and this will cause citizens to be uncomfortable
Traffic Congestion
Bad for roads and cause people to be late for work
Resource depletion
No resources, will cause problem of scarcity to be more severe.
Positive externalities
Education
Education will benefit the wider society. This is because if people are skilled, they will do useful jobs such as doctors. Productivity and standard of living will increase
Vaccination
People can prevent infection together
Health care
If people are more healthier they can help the economy better.
There are also positive externalities such as providing happiness to society.
Externalities: The third party spillover effects
External cost + Private cost = Social cost
External benefit + Private benefit = Social benefit
Definitions:
Private costs: Costs of an economic activity to individuals and firms
External costs: Negative spillover effects of consumption of production
Social Costs: Costs of an economic activity to society as well as the individual and firm
External benefit: Positive spillover effects of consumption or production
Private benefit: Rewards to third parties of an econmic activity
Social benefit: Benefits of an economic activity to society as well as to the individual as well as the firm
Government interventions to externalities
Fines
Fines is to reduce external costs. Basically like taxation.
Pollution permits
Government can issue a pollution permit to factories causing too much air pollution. Pollution permits give companies a right to discharge pollution
Subsidies
Government can offer subsidies as rewards. By giving subsidies to firms that benefit society, There will be an increase in supply and society will benifit
Government regulation
Government now helps issues such as climate change and deforestation.
Taxation
Taxation can be used to reduce external costs of production. It causes supply from companies to decrease
BY AIDAN