Answer to Question #157638 in Economics for stephanie maree

Question

Explain the problem of negative externalities in the market for energy (from carbon based fuels) as economists describe them

Answer 1

EXTERNAL EFFECTS (externalities) are the impact of economic entities participating in a given transaction on third parties not taking part in the transaction; factors that are not taken into account in determining the gross national product but have an impact on the well-being of people.

Distinguish between positive and negative externalities.

Negative externalities (negative externalities) are the negative impact of the economic entities participating in the transaction on third parties; it is the cost of using the resource, not reflected in the price of the product.

Negative externalities can result from both the production and consumption of goods exchanged in the market. An example of a negative externality would be the discharge of industrial waste into a river used for water intake and/or for fishing and swimming. The greater the amount of refinery waste dumped into the world's oceans, the greater the damage to the benefits associated with the use of ocean water.