Economics Externalities Questions
Externalities can impact consumer surplus in different ways.
Positive externalities, such as the presence of public parks or education, can increase consumer surplus. This is because these externalities provide additional benefits to consumers beyond what they pay for, leading to an increase in their overall satisfaction and surplus.
On the other hand, negative externalities, such as pollution or noise, can decrease consumer surplus. These externalities impose costs on consumers that are not reflected in the price they pay for a good or service. As a result, consumers may experience a decrease in their surplus due to the additional costs or reduced satisfaction caused by the negative externalities.
Overall, externalities can either enhance or diminish consumer surplus depending on whether they are positive or negative in nature.