aqa economics unit 1 externalities
i am bricking it for tuesday's exam!! and i am still confused about externalities and the diagrams used… can someone help me please?! much appreciated 
xxxx
xxxxHey, im bricking it about economics too! tuesday is gonna be hell haha. externalitys are the hardest part of unit 1
Basically, an exteranalilty is a cost or benefit to a 3rd party outside a transaction.
An external cost is a cost outside a transaction e.g a factory polluting smoke will pollute and cause illness, that is the external cost.
An external benefit is a benefit outside a transaction e.g vaccinations causing a healthier workforce so higher productivity.
People/firms dont take into account the cost/benefit. e.g the factory doesnt care about the pollution.
When constructing diagrams,remeber when its positive consumption e.g vaccinations the demand splits into marginal soicial benefit and marginal private benefit.
When negative production e.g factory emmiting pollution its supply that splits.
REMEMBER SOCIAL (BENEFIT OR COST) IS ALWAYS THE TOP LINE.
Also, when finding the triangle of welfare loss/gain think that the gain triangle looks like a 'play' button and is 'facing' right.
http://tutor2u.net/economics/content/topics/externalities/what_are_externalities.htm
http://tutor2u.net/economics/revision-notes/as-marketfailure-negative-externalities.html
http://tutor2u.net/economics/revision-notes/as-marketfailure-positive-externalities.html
Sorry if i didnt explain it that well, just regurgitate it onto the exam paper and you will be fine
Good Luck!
Basically, an exteranalilty is a cost or benefit to a 3rd party outside a transaction.
An external cost is a cost outside a transaction e.g a factory polluting smoke will pollute and cause illness, that is the external cost.
An external benefit is a benefit outside a transaction e.g vaccinations causing a healthier workforce so higher productivity.
People/firms dont take into account the cost/benefit. e.g the factory doesnt care about the pollution.
When constructing diagrams,remeber when its positive consumption e.g vaccinations the demand splits into marginal soicial benefit and marginal private benefit.
When negative production e.g factory emmiting pollution its supply that splits.
REMEMBER SOCIAL (BENEFIT OR COST) IS ALWAYS THE TOP LINE.
Also, when finding the triangle of welfare loss/gain think that the gain triangle looks like a 'play' button and is 'facing' right.
http://tutor2u.net/economics/content/topics/externalities/what_are_externalities.htm
http://tutor2u.net/economics/revision-notes/as-marketfailure-negative-externalities.html
http://tutor2u.net/economics/revision-notes/as-marketfailure-positive-externalities.html
Sorry if i didnt explain it that well, just regurgitate it onto the exam paper and you will be fine
Good Luck!
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