By: Crystal G. Lesly A. Gabby H. & Daisy M. Group 4: Externalities By: Crystal G. Lesly A. Gabby H. & Daisy M.

Vocabulary Public goods: goods or services whose benefit are available to everyone and are paid for collectivity. Ex: uncrowded highways, national defense, police and fire protection Externality: economic side effect that can be positive or negative to a third party that wasn't involved overall in the activity. Ex: Pollution Negative externality: harmful side effect that affects an uninvolved third party Ex: Noise from an airport after expansion Positive externality: Beneficial side effect that affects an uninvolved third party Ex: Jobs produced by the airport expansion

How do Externalities tie in with Economics?! Externalities are seen as events that can have an affect on something that's not really related to it in any way, but still affect severely. In most cases this occurs when natural disasters strike and the economy is left defenseless and end in market failure as a result. Most things are completely useless after a severe natural disaster. Usually public goods like highways that are destroyed, the process of restoring them again is rather difficult.These events almost always leave the consumers and producers at a draw in thinking what to do next. Keeping in mind that these positive and negative externalities’ costs and benefits are not reflected in the buyer and sellers pay.

Real Life Situations.. Hurricane Katrina distraught the U.S. immensely as it took around $96-105 billion in damages. It ruined public goods such as highways and subways, all forms to travel. All in the states of Florida, Mississippi, Louisiana, and a few other southern states. Not only did it hurt public goods it wiped away many jobs from the people and interrupted the oil production down in the Gulf. Other situations include earthquakes, as they hurt the house buying market considering the quakes can make the buyer question the house's condition. Making the market lower its prices to keep going and still sell houses.

Externalities Positive Negative Alyson lives near airport. At five o’clock in the morning she can hear the airplanes taking off. Everyday other day they awaken her. Samantha is given a flu shot by her doctor. This reduces the probability that she will get the flu and it also reduces the probability that others will get the flu, too.

Test Questions: Why does the market not provide with more public goods? a.they’re not necessary b. the government doesn't want to spend tax dollars because then they have to raise taxes c. the market isn't directly involved with the government d. they find other issues as a priority. True/False: The market provides with little supplies when the people refuse to pay for them. What do externalities indicate? a. government spending b. community involvement c. environment crisis d. market failures

Would You Rather: Negative Externality Edition! -Own a factory that pollutes the nearby river horrible and ruin local fishermen's sales OR -Build a new road and ruin the beautifully persevered spot of nature in the area because of construction. -Shoot a couple rounds up into the air to show how happy you are for the new year but unexpectedly hit innocent party go-ers miles away. OR -Drink a few one too many, drive home but crash into a electrical pole. Leaving a few residences in the area without power. -Be the person who experiences second hand smoke from a nearby smoker OR -Be disrupted by your neighbors blaring music hence not allowing you to sleep the whole night

Test Questions (cont.) The benefits received by a third party that was not involved in the activity that produced a good are known as.. a. Social costs b. Positive Externalities c. Negative Externalities d. Tax Collectives