Negative Externalities In Economics

1350 Words6 Pages
The concept of Externalities play a central roles in the theory of economic growth and resource allocation. The concept was first discussed by Marshall and later by Pigou who give an analytical content of it. This concept of Externalities has become prominent within economics and have remained of great and growing importance in economics of science. According to the article written by Erik T. Verhoef, it says that without a doubt, it can be said that beginning from the conventional neoclassical economic structure, the most coherent approach to look at issues of environmental pollution is from the point of view of external cost. Admittedly, economist have been surveying the concept of externalities theoretically for a long period of time…show more content…
There are positive externalities and negative externalities. According to the article written by Taylor, it says that a positive externality exists when a firm decision maker or an individual does not get the full benefit of the decision. The benefit to the firm is less than or not exact to the benefit to the society. The demand curve that is the marginal benefit curve of an individual making decision is less than marginal benefit curve to society when a positive externalities exist in an unregulated market. With positive externalities, less is being produced and consumed than the socially optimal level…show more content…
This shows that in negative externality, the cost to the society is more prominent than the cost the consumer is paying. However, the buyers decides whether their marginal cost is equal to their marginal benefit, and since they don 't consider the cost of the negative externalities, negative externalities will result in market inefficiencies unless legitimate move is made ("Negative Externality").
A classic example of negative externalities found in Yola is pollution from a factory. Nigerian Beverages Production Co. Limited located at No. 5, Numan Road, is a factory that can be found in Yola City. It causes pollution which harms animals, plants and humans and it can also cause health problems and erode the quality of life and property values in a community. Another example of Negative externalities can be noise pollution from Yola Airport. This noise pollution causes sleep disruption speech interference and digestive patterns and also change in blood

More about Negative Externalities In Economics

Open Document