Positive And Negative Ex Tern Ali Ties
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http://www.bized.ac.uk
Positive and Negative Externalities
Copyright 2005 – Biz/ed
http://www.bized.ac.uk
Positive and Negative Externalities • The effects of a decision by consumers and producers that has an impact on a third party – Positive Externalities – beneficial effects on third parties – Negative Externalities – costs incurred by third parties
Copyright 2005 – Biz/ed
http://www.bized.ac.uk
Positive and Negative Externalities • Costs and benefits in production: • External costs in production – where MSC = MSB – MPC – e.g. air and water pollution, congestion, housing development on green belt areas, destruction of hedgerows and wildlife, noise, pollution, anti-social behaviour, crime
• External benefits in production – where MSC < MPC – e.g. human resource development, research and development in industry
Copyright 2005 – Biz/ed
http://www.bized.ac.uk
Positive and Negative Externalities • Costs and benefits in consumption: • External costs in consumption – where MSB < MPB – e.g. passive smoking, litter, noise, antisocial behaviour
• External benefits in consumption – where MSB > MPB – e.g. preventative health care – vaccinations, public transport, attractive gardens, bathing regularly! Copyright 2005 – Biz/ed
http://www.bized.ac.uk
Positive and Negative Externalities • External costs – socially efficient output is less than current output • External benefits – socially efficient output is greater than current output • Socially efficient output is where MSC + MPC = MSB + MPB Copyright 2005 – Biz/ed
http://www.bized.ac.uk
Positive and Negative Externalities
• • • • • •
• Measuring positive and negative externalities: Consumer surplus Producer surplus Willingness to pay Net Present Values Risk values – probability of an event x monetary value Cost-Benefit Analysis Copyright 2005 – Biz/ed
http://www.bized.ac.uk
Positive and Negative Externalities
Copyright: Karoly Feher and Drew Broadley, stock.xchng
• Weighing up the costs and benefits • Benefits from production of chemicals/pharmaceuticals and energy • Costs of generating these products/services Copyright 2005 – Biz/ed
Positive and Negative Externalities
Copyright 2005 – Biz/ed
http://www.bized.ac.uk
Positive and Negative Externalities • The effects of a decision by consumers and producers that has an impact on a third party – Positive Externalities – beneficial effects on third parties – Negative Externalities – costs incurred by third parties
Copyright 2005 – Biz/ed
http://www.bized.ac.uk
Positive and Negative Externalities • Costs and benefits in production: • External costs in production – where MSC = MSB – MPC – e.g. air and water pollution, congestion, housing development on green belt areas, destruction of hedgerows and wildlife, noise, pollution, anti-social behaviour, crime
• External benefits in production – where MSC < MPC – e.g. human resource development, research and development in industry
Copyright 2005 – Biz/ed
http://www.bized.ac.uk
Positive and Negative Externalities • Costs and benefits in consumption: • External costs in consumption – where MSB < MPB – e.g. passive smoking, litter, noise, antisocial behaviour
• External benefits in consumption – where MSB > MPB – e.g. preventative health care – vaccinations, public transport, attractive gardens, bathing regularly! Copyright 2005 – Biz/ed
http://www.bized.ac.uk
Positive and Negative Externalities • External costs – socially efficient output is less than current output • External benefits – socially efficient output is greater than current output • Socially efficient output is where MSC + MPC = MSB + MPB Copyright 2005 – Biz/ed
http://www.bized.ac.uk
Positive and Negative Externalities
• • • • • •
• Measuring positive and negative externalities: Consumer surplus Producer surplus Willingness to pay Net Present Values Risk values – probability of an event x monetary value Cost-Benefit Analysis Copyright 2005 – Biz/ed
http://www.bized.ac.uk
Positive and Negative Externalities
Copyright: Karoly Feher and Drew Broadley, stock.xchng
• Weighing up the costs and benefits • Benefits from production of chemicals/pharmaceuticals and energy • Costs of generating these products/services Copyright 2005 – Biz/ed
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