{"id":5274,"date":"2019-02-14T08:48:50","date_gmt":"2019-02-14T03:18:50","guid":{"rendered":"http:\/\/astan.lk\/al_virtualclassroom\/?p=5274"},"modified":"2019-02-16T11:33:33","modified_gmt":"2019-02-16T06:03:33","slug":"externalities","status":"publish","type":"post","link":"https:\/\/astan.lk\/al_virtualclassroom\/externalities\/","title":{"rendered":"Externalities"},"content":{"rendered":"<ul>\n<li>Externalities are the non compensated benefits or losses borne by an external party that is not participating in an economic activity.<\/li>\n<li>Externalities arise from consumption as well as production.<\/li>\n<\/ul>\n<h3>\u00a0<span style=\"color: #000000;\">Externalities of Production<\/span><\/h3>\n<ul>\n<li>Benefits or losses borne by an external party due to a production activity is identified as externalities of production.<\/li>\n<\/ul>\n<h3><span style=\"color: #000000;\">Positive Externalities of Production\u00a0<\/span><\/h3>\n<ul>\n<li>The research focused new technology<\/li>\n<li>Beautiful parks and gardens<\/li>\n<\/ul>\n<h3><span style=\"color: #000000;\">Negative Externalities of Production<\/span><\/h3>\n<ul>\n<li>Industrial activities that burn fossil fuels<\/li>\n<li>Industrial activities that deplete the ozone layer<\/li>\n<\/ul>\n<h3><span style=\"color: #000000;\">Externalities of Consumption\u00a0<\/span><\/h3>\n<ul>\n<li>Benefits or losses born to an external party due to a consumption activity is identified as externalities of consumption.<\/li>\n<\/ul>\n<h3><span style=\"color: #000000;\">Positive Externalities of Consumption\u00a0<\/span><\/h3>\n<ul>\n<li>\u00a0Educational T. V. programmes<\/li>\n<\/ul>\n<h3><span style=\"color: #000000;\">Negative Externalities of Consumption<\/span><\/h3>\n<ul>\n<li>Collection of garbage<\/li>\n<li>Emission of smoke from vehicles<\/li>\n<\/ul>\n<h3><span style=\"color: #000000;\">External Costs &#8211;\u00a0External Benefits<\/span><\/h3>\n<ul>\n<li>Negative externalities involve external costs and positive externalities involve<br \/>\nexternal benefits.<\/li>\n<\/ul>\n<h3><span style=\"color: #000000;\">Social Costs &#8211; Social Benefits\u00a0<\/span><\/h3>\n<ul>\n<li>Social costs and social benefits are based on external costs and benefits.<\/li>\n<li>Private costs + External costs = Social costs<\/li>\n<li>Private benefits + External benefits = Social benefits<\/li>\n<li>Only private costs and private benefits are taken into account in a market economy.<br \/>\n\u0097<\/li>\n<li>The decisions taken on the production and consumption of goods and services are not optimum decisions as externalities are not taken into consideration.<\/li>\n<li>This situation is illustrated by the following graph:<\/li>\n<\/ul>\n<p><a class=\"fancybox\" href=\"http:\/\/astan.lk\/al_virtualclassroom\/wp-content\/uploads\/2017\/01\/Screenshot-366.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-7641 size-medium\" src=\"http:\/\/astan.lk\/al_virtualclassroom\/wp-content\/uploads\/2017\/01\/Screenshot-366-300x253.png\" alt=\"Screenshot (366)\" width=\"300\" height=\"253\" \/><\/a><\/p>\n<ul>\n<li>According to graph the equilibrium point (optimum point) is at point \u201cA\u201d where MSC is equal to MPB. Equilibrium (optimum) quantity produced and consumed is Q0.<\/li>\n<li>But when the social benefits are taken into account optimum equilibrium point is at point \u201cB\u201d where MSC is equal to MSB. Q1 is the equilibrium production and consumption point.<\/li>\n<li>When there is a positive externality of consumption, optimum consumption exceeds optimum market consumption when social benefits are less.<\/li>\n<\/ul>\n<p><a class=\"fancybox\" href=\"http:\/\/astan.lk\/al_virtualclassroom\/wp-content\/uploads\/2017\/01\/Screenshot-367.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-7642 size-medium\" src=\"http:\/\/astan.lk\/al_virtualclassroom\/wp-content\/uploads\/2017\/01\/Screenshot-367-300x264.png\" alt=\"Screenshot (367)\" width=\"300\" height=\"264\" \/><\/a><\/p>\n<ul>\n<li>According to graph optimum market production is at \u201cA\u201d where MC is equal to MSB. Q0 is the equilibrium and optimum level of production.<\/li>\n<li>When Social benefits are considered, optimum production is at \u201cB\u201d where MSC = MSB Q1 is the equilibrium and optimum production point.<\/li>\n<li>When there is a positive externality of production and social benefits are taken into account, optimum production exceeds the optimum market production.<\/li>\n<li>Following steps can be taken to prevent ill effects caused by externalities:\n<ul>\n<li>Compensation<\/li>\n<li>Internalization<\/li>\n<li>Rationing<\/li>\n<li>Charging license fees<\/li>\n<li>Fines<\/li>\n<li>Imposing regulations<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Externalities are the non compensated benefits or losses borne by an external party that is not participating in an economic activity. Externalities arise from consumption as well as production. \u00a0Externalities of Production Benefits or losses borne by an external party due to a production activity is identified as externalities of production. Positive Externalities of Production\u00a0 [&hellip;]<\/p>\n","protected":false},"author":842,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[54,2693],"tags":[],"class_list":["post-5274","post","type-post","status-publish","format-standard","hentry","category-economics","category-unit-8-en"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Externalities - Learning &amp; Education Portal<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/astan.lk\/al_virtualclassroom\/externalities\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Externalities - Learning &amp; Education Portal\" \/>\n<meta property=\"og:description\" content=\"Externalities are the non compensated benefits or losses borne by an external party that is not participating in an economic activity. 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