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Externalities: Social Benefits and Social Costs definitions

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Terms in this set (14)

  • Externality
    Impact on individuals outside a transaction, resulting in unintended costs or benefits for society.
  • Negative Externality
    Unintended harm imposed on bystanders, such as pollution affecting residents near a factory.
  • Positive Externality
    Unintended benefit received by bystanders, like increased productivity from widespread education.
  • Private Cost
    Expense incurred by producers, reflected in the supply curve, excluding effects on outsiders.
  • Social Cost
    Total expense to society, combining private and external costs, shown by the marginal social cost curve.
  • External Cost
    Expense imposed on individuals not involved in a transaction, such as pollution or noise.
  • Marginal Social Cost
    Incremental expense to society for producing one more unit, including both private and external costs.
  • Private Benefit
    Advantage gained by buyers, represented by the demand curve, excluding effects on others.
  • Social Benefit
    Total advantage to society, combining private and external benefits, shown by the marginal social benefit curve.
  • External Benefit
    Advantage received by individuals not involved in a transaction, such as reduced disease spread from vaccination.
  • Marginal Social Benefit
    Incremental advantage to society from consuming one more unit, including both private and external benefits.
  • Market Failure
    Situation where market outcomes are inefficient, often due to unaccounted externalities.
  • Deadweight Loss
    Lost societal surplus from inefficient production levels, visible as a gap between actual and optimal equilibrium.
  • Property Rights
    Legal ownership and control over resources, crucial for determining whether externalities arise.