Question

Assignment Details

Externalities are costs or benefits that are caused by producing or consuming a good but that are not included in the market price for the good. They are simply the unintended side effects of market activities. Externalities can be positive or negative. One example of a positive externality might be when beekeepers provide a means of pollination for fruit growers. Air, water, and noise pollution are examples of negative externalities.

Please answer the following questions to describe an instance in which you, an acquaintance, or family member has experienced an externality. Please use economic concepts, and use references in your main contribution.

1. How did it affect you (or your acquaintance or family member?) Please explain.
2. What were the effects? Please explain.
3. Did you (or your acquaintance or family member) experience increased or decreased health or quality of life? Please explain.
4. If you choose to write about a negative externality such as pollution, what do you think is the best way to reduce pollution? Please explain.
5. If you choose to write about a positive externality, what is the economic problem that positive externalities create? How would you resolve that? Please explain.

Answer 1

Ans) Externalities in simple words can be called as side effects of something. It can be both positive and negative.

Negative externality is when Private benefit > Social benefit

Positive externality is when Social benefit > Private benefit.

Some example of positive externality are education, subsidies and healthcare by government.

And that of negative externality are pollution, environmental degradation etc.

a) Education has played an important role in my personal development. It has made me more creative and open minded. It enables me to conceive good thoughts and do analysis before taking any decision. It has upgraded my skills. My family is also benefitted from my education as I help them making better decisions.

b)Education has made me smarter, better person and a better civilian as i realise my social and moral responsibilities more, now I am more aware about my environment and able to take atleast some feasible steps to protect it and there are many more things in which education has played a great role to make me a better person. With my education I can better serve my country and can also lead to its economic development. Not only this , with my education I will also be able to educate others and help them take better decisions. I can also help maintain social harmony.

c) Education has surely increased quality of my life. As I am better than yesterday, i am able to understand the phenomenons of world , i am aware of my social responsibilities, I know how to improve my health and well being. With the help of good education I can secure a good job in future which will again add to quality of my life.

d) Positive externality though provide benefits, they also cause some economic problems like when government gives subsidies ,the burden falls upon the tax payers. Positive externality may also lead to inefficient markets and might discourage production.

It can be resolved by providing subsidy and healthcare by carefully picking the social group which really needs it. Otherwise it will put unnecessary burden on the society and may lead to more social loss than benefit in future.