Question

Give an example that illustrates the difference between private costs and social costs.

Answer 1

Private cost is a cost that includes cost which is paid personally for the use

But in social cost, the externality is also added

Let us clear it with an example-suppose I own a new Yamaha bike so I paid for its price, insurance, road tax etc.and they are called private cost because I have paid for them

But unknowingly or knowingly I also contribute towards polluting the environment which comes under negative externality and has some social cost. Here, with private cost, the externality is also added.