8a externalities

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  • 1. Good Neighbour?

2. Types of ExternalityPrivate CostPrivate benefitExternal CostExternal benefit 3. Private Costs Costs to the company of their actions Flat Car Park Cheaper to build Uses More SpaceMulti-Storey More Expensive Less SpaceWhat do you think is the key factor for a company in this choice? 4. Private Benefit What the company gets for the action Car Park Charge for its use Encourage people to come to your shopping Centre / Attraction Space for your employees to park Stop people parking in the street 5. External Costs (Negative Externalities)External costs are the costs to other people. The external cost in the car parks case is the loss of the parkland and for local residents it might spoil their view. 6. External Benefits (Positive Externalities) External benefits are benefits to people who are not involved in the business. It might stop park users from parking in residents driveways and along the road near their houses.Near Stowmarket Station 7. Key Term Third Party Person not involved in decisions of the company. i.e. Not the business or the customer. 8. McDonalds