1.1. Costs and Benefits Flashcards
Social Costs
total costs to society of a particular action
Private Costs
costs incurred by those individuals directly involved in production or consumption of the good / service.
External Costs
costs incurred by third parties not directly involved in the action
Social Costs =
Private Costs + External Costs
Social Benefits
total benefits to society of a particular action
Private Benefits
benefits received by those individuals directly involved in production or consumption of the good / service.
External Benefits
benefits received by third parties not directly involved in the action
Social Benefits =
Private Benefits + External Benefits
Net private benefits =
Private benefit > Private cost
Net private cost
Private benefit < Private cost
Net external benefit
External benefit > External cost
Net external cost
External benefit < External cost
Net social benefit
Social benefit > Social cost
Net social cost
Social benefit < Social cost
Net costs
when costs minus benefit results in an overall cost.
