Overview
Analyzing market equilibrium with externalities is essential for understanding how economic activities affect society. Market equilibrium occurs when supply meets demand, but externalities can disrupt this balance by imposing costs or benefits on third parties. Recognizing both positive and negative...
Key Terms
Example: At a price of $10, the quantity of apples supplied equals the quantity demanded.
Example: Pollution from a factory affects nearby residents.
Example: A well-maintained park increases property values in the area.
Example: Noise pollution from a concert affects local residents.
Example: When externalities lead to overproduction or underproduction.
Example: As prices rise, suppliers are willing to produce more.
Related Topics
Public Goods
Goods that are non-excludable and non-rivalrous, leading to free-rider problems.
intermediateCost-Benefit Analysis
A method for evaluating the total expected costs versus benefits of a project or decision.
intermediateBehavioral Economics
The study of how psychological factors affect economic decision-making.
advancedKey Concepts
Supply and DemandPositive ExternalitiesNegative ExternalitiesMarket Failure