A city is experiencing increased noise pollution due to late-night parties at local bars. Many residents are affected by the loud music, leading to complaints and decreased quality of life. How can the concept of negative externalities in consumption help explain this situation and what potential government intervention could be appropriate?

Negative externalities in consumption occur when the actions of one group, like bar patrons enjoying loud music, negatively impact others, such as nearby residents trying to sleep. In this case, the loud parties create disturbances that lower the quality of life for those living nearby, which is a cost not reflected in the price of drinks at the bar. The bar owners might not feel the consequences of their loud music, leading to more noise and complaints from residents. A potential government intervention could be to enforce noise regulations that limit how loud music can be played after a certain hour, helping to balance the enjoyment of bar-goers with the peace of local residents. By doing this, the government can help reduce the negative impact on the community and improve overall living conditions.