EconomicsCode 9708
Private costs and benefits, externalities and social costs and benefits
What this topic asks you to be able to do
- what social costs (SC) are and how to work them out, as private costs (PC) plus external costs (EC), including marginal private costs (MPC), marginal external costs (MEC) and marginal social costs (MSC)
- what social benefits (SB) are and how to work them out, as private benefits (PB) added to external benefits (EB), including marginal private benefits (MPB), marginal external benefits (MEB) and marginal social benefits (MSB)
- what is meant by a positive externality and by a negative externality
- the positive and negative externalities that come from consumption, and those that come from production
- the deadweight welfare loss that results from externalities, both positive and negative
- use of costs and benefits to analyse decisions (net present value does not need to be known)