Externalities Flashcards
Private Benefit
The satisfaction the consumer gains from consumption.
Private Costs
The cost in monetary terms of buying the good.
External Cost
The negative spill over effects
External Benefit
The positive spill over effect
Marginal
One extra unit either consumed or produced.
Private Marginal Cost
The cost to the firm of producing or consuming one extra good or service
Private Marginal Benefit
The additional utility gained by the consumer from consuming and extra unit.
Social Marginal Cost
The total overall cost to society of consuming one extra
Social Marginal Benefit
The overall benefit to society of consuming an extra unit
Externality
The spill over effect of production or consumption which affect society as a whole rather than the individual producer or consumer
Negative Externalities
When production or consumption imposes external costs on third parties outside of the market for which no appropriate compensation is paid.
