ECON 1050 Lecture Notes - Lecture 7: Influenza Vaccine, Marginal Cost, Marginal Utility

• School: University of Guelph
• Department: Economics
• Course: ECON 1050
• Professor: Eveline J Adomait

Document Summary

An externality is a cost or benefit from an action that falls on someone other than the person or firm choosing the action. Externalities that impose a cost are negative externalities, externalities that generate a benefit are positive externalities. Burning coal, logging, clear cutting, these are all examples of negative production externalities, the cost are borne by everyone, even future generations. An example of positive production externalities is when honeybees collect pollen and nectar from orange blossoms to make honey. During this process they also transfer pollen between blossoms, which helps to fertilize them. There are two positive production externalities in this process. The orange farmer gets a positive externality from the honeybees and the honeybee farmer gets a positive externality from the oranges. Negative consumption externalities are a source of irritation for most of us. For example, smoking in confined spaces, or loud outdoor concerts.