Type:

Video

Description:

If Art sells potato chips to Betty, both Art and Betty are happy with the transaction. Betty has chips, and Art has been paid for them. If Betty eats her chips loudly and it irritates Carl, then Carl bears a cost because of Art and Betty's transaction. Carl didn't have anything to do with the sale of the chips, but now he has to listen to them crunching. The cost Carl bears is called an externality. It is a cost that affects someone outside of the transaction. Prof. Michael Munger explains how externalities can arise and some options for resolving them.

Subjects:

  • Social Studies > Economics

Education Levels:

  • Grade 11
  • Grade 12
  • Higher Education

Keywords:

externality, economics, market failure

Language:

English

Access Privileges:

Public - Available to anyone

License Deed:

Creative Commons Attribution 3.0

Collections:

None
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