Externalities and Market Failure - 2021 Revision Update

This study resource provides a fully-updated suite of short revision videos on the economics of externalities and market failure.

This revision video introduces students to the concept of externalities and works through the key definitions including the important difference between external costs and benefits and private & social cost and benefit.

In this video we look at some examples of negative externalities from production and from consumption

In this video we work through step-by-step the analysis diagrams that can be used to show negative externalities from production and the market failure / loss of social welfare that can result.

In this short video we cover some of the key government policy interventions that can be used to address market failure from negative externalities. These include tougher regulatory standards, carbon taxes and carbon trading.

In this video we work through eight past exam multiple choice questions on negative externalities and different forms of government intervention.

In this video we look at examples of positive externalities from consumption and how under-consumption of activities with external benefits can lead to market failure and a loss of social welfare.

In this short video we look at examples of and analyse positive externalities from production.

In this video, we work through six past paper multiple choice questions that give you a chance to check your understanding of positive externalities from consumption and production.

This short revision video looks at mixed externalities. In most markets, there are both positive and negative externalities to consider, so the net social benefit or net social cost becomes an important aspect of the analysis and evaluation. Mixed externalities occur when production and/or consumption leads to both external costs and external benefits. The socially optimum level of output will depend on the extent and value of these negative and positive externalities.