7.4.1 Social costs: SC = PC + EC
Definition: Private costs (PC) are costs paid by the producer or consumer of a good. External costs (EC) are costs imposed on third parties not involved in the transaction and not paid for. Social cost = private cost + external cost. At the margin: MSC = MPC + MEC.
🔒 Also in the full notes
- 7.4.2 Social benefits: SB = PB + EB
- 7.4.3 Definition of positive externality and negative externality
- 7.4.4 Positive and negative externalities of both consumption and production
- 7.4.5 Deadweight welfare losses arising from positive and negative externalities
- 7.4.6 Asymmetric information and moral hazard
- 7.4.7 Use of costs and benefits in analysing decisions (cost–benefit analysis)
- Exam practice: 3 practice questions
- 3 exemplar 20-mark essays with full model answers, mark breakdowns and common mistakes
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