Economics Externalities Questions
A network externality refers to the impact that the use or adoption of a product or service has on the value of that product or service for other users. It occurs when the value of a good or service increases as more people use it. For example, the value of a social media platform increases as more users join, as it allows for more connections and interactions.
On the other hand, a positive consumption externality refers to the positive spillover effects that the consumption of a good or service has on individuals or society. It occurs when the consumption of a good or service benefits others who are not directly involved in the transaction. For example, when someone gets vaccinated, it not only protects them from the disease but also reduces the risk of transmission to others, benefiting the entire community.
In summary, the main difference between a network externality and a positive consumption externality is that a network externality relates to the impact on the value of a product or service for other users, while a positive consumption externality relates to the positive spillover effects on individuals or society from the consumption of a good or service.