are all the costs of making the good included in the price? externalities
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Are all the costs of making the good included in the price?Externalities
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If you’ve ever been helped or harmed by someone else's decisions, you’ve experienced an externality.
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Externalities
•An externality is an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume
EOC Study Guide
Microeconomics # 4
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Positive Externalities
•A positive externality is a beneficial side effect of an action that is felt by other
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How Can Legislators encourage positive externalities?
• How can they get consumers to buy more of a good?▫By subsidizing consumers for purchasing the good
• How can they get producers to make more of a good?▫By subsidizing producer for making the good
Examples:Electric carsSolar panelsCollege education
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Negative Externalities•A negative externality is an adverse side
effect of an act that is felt by others
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Are all of the costs of a business “paid” by the business?
Hot sauce video clip
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How Can Legislators prevent negative externalities from causing market failure?
•How can you get consumers to buy less of a good and/or producers to make less of a good?▫By taxing goods that are overproduced
Examples:Damage caused by fossil fuelsIllness caused by smoking
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What else can the government do about negative externalities?
Possible solutions to externalities
You make the call:• Break into groups of four• Read the news story on “Microbeads”• Consider the possible solutions
discussed in the video clip • Write down your group’s solution to
this externality
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Real Life Examples of Dealing With Externalities:•Example One:
▫Cabin owner who didn’t want the sheep to be trailed through his property
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Real Life Examples of Dealing With Externalities Continued:•Example Two:
▫The homeowner who didn’t want the ice cream truck to go down his street
http://www.songsforicecreamtrucks.com/