Download - 8a externalities
Externalities
Mr Abela
Good Neighbour?
Private Cost
Private benefit
External Cost
External benefit
Types of Externality
Private CostsCosts to the company of their actions
Flat Car Park• Cheaper to
build• Uses More
Space
Multi-Storey• More
Expensive• Less Space
What do you think is the key factor for a company in this choice?
Private BenefitWhat the company gets for the actionCar 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
External Costs (Negative Externalities)
External costs are the costs to other people. The external cost in the car park’s case is the loss of the parkland and for local residents it might spoil their view.
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
Key Term
Third Party
Person not involved in decisions of the company. i.e. Not the business or the customer.
McDonalds