Microeconomics

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My project is completely based on a chapter from our textbook which talks about externalities. I found this topic interesting and found two articles which are related to this matter. I found it really interesting, how others actions can impact our lives. So, to start with my project I would like to first discuss briefly about externalities and their types.

What is an externality?

Externality is a cost or benefit that arises from production and falls on someone other than the producer, or a cost or benefit that arises from consumption and falls on someone other than the consumer. We can call an externality which imposes a cost as a negative externality and the one which gives benefit as a positive externality.

What are the types of externalities?

Externalities are of four types:

• Negative consumption
• Negative production
• Positive consumption
• Positive production

Settlement with Continental Carbon Company to Reduce Air Pollution at Manufacturing Facility in Alabama[pic 4]

I found this article on internet which talks about the Continental carbon company’s agreement to install pollution control technology that will significantly cut emissions of harmful pollutants at manufacturing facilities in Alabama, Oklahoma, and Texas, This is a type of positive production externality. Because of Continental Carbon Company’s decision to install pollution control technology, the whole economy will get benefit from that. Since there will be less pollution in the environment which will provide a better environmental conditions in the areas. Since the people living in these areas will get benefit of better environmental conditions, and it is related to the production, that’s why it is called a positive production externality. If some other persons get benefit from some other person’s actions that is referred to as an positive externality, in this case due to the action of the Continental Carbon Company the people living around the areas where these factories are located will get benefit of a pollution free environment. This will reduce the emissions of harmful pollutants and will also reduce the chances of people getting sick from that pollution, which is definitely a positive effect on the people’s lives.