International Baccalaureate: Economics

Economics Article Commentary. London gets EU reprieve over air pollution. The air pollution is a kind of Negative externalities of consumption.

The tiny sooty particles in London's air are believed to cause asthma, cardiovascular problems, lung cancer and premature death. The negative externalities of consumption produced here make the marginal social benefits in each case less than the marginal private benefits. The marginal social benefit is equal to the marginal private benefits plus the external benefits. If these goods are being over-consuming, then for some of those goods, the overall cost to society is greater than the benefit received . The graph below shows the effect of a negative externality of consumption. According to the article, people who drive cars enjoy the private benefits of the cars, but this will create external costs for other people.

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