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The concept of external costs and benefits.
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Katarina Kollarova Class 12 Economics: Explain using examples, the concept of external costs and benefits. Why are these market failures? What can governments and society do to correct these externalities? A market represents the private forces of demand and supply. Consumers demand products to maximise their own welfare and producers supply them to maximise their own profit. However, there are cases where markets clearly do not work well, or do not work at all. These cases are known as market failures. There are many market activities that affect other people. These are known as externalities. They are the positive and/ or negative effects that exchanges between producers and consumers may have on people who are not in the market. When such effects are pleasurable they are called external benefits. When they are unpleasant, or impose a cost on people other than the buyers or sellers, they are called external costs....
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