Question

Many governments have created policies on which travelers are required to be in quarantine hotels that they managed, some policies on which stipulates that they pay the cost of what they consume while they are in quarantine, some don't. Can we consider it a negative externality, if taxpayers of the said country pay for the traveler's costs, for those countries who do not require travelers to pay for their quarantine since it is the cost imposed on the society even if they are not the one traveling themselves? Why or why not? Kindly comprehensively explain.

Answer 1

Externality can be positive or negative in nature. When consumption of a goods/ services cause a benefit to third party, is known as Positive Externality. However when the same consumption causes cost to the third party it will be considered as Negative Externality. Here when government announces the traveler to pay for the quarantine then it has a positive externality for the people of that state in the form of reducing burden however when the same burden is bared by the government it leads to negative externalities as it will create tax burden for the people of that state.

But as the circumstance are extreme the negative externalities will still help to create a balance in the society during covid-19