Tag Archives | Relationship

Negative Externality and Economic Inefficiency

In this article we will discuss about how negative externality becomes a source of economic inefficiency. Suppose John an ambitious rock musician, resort to the practice of playing electronic guitar, every day for five hours in his house. However John’s immediate neighbor, Peter does not enjoy listing to the ear-storming guitar notes. The practice time […]

Positive Externalities and Allocative Efficiency

After reading this article you will learn about the relationship between positive externalities and allocative efficiency. Positive externality occurs whenever private markets fail to allocate resources on the basis of full social benefits. I­mmunization against communicable disease, external benefits from edu­cation at schools are typical examples of positive externalities. Indi­viduals who are external to the […]

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