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Summary A level Economics (AQA) Externalities revision notes £4.66   Add to cart

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Summary A level Economics (AQA) Externalities revision notes

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Concise note on externalities with graphs and description of graphs. Perfect for revision and when practising exam questions and essays.

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  • June 4, 2024
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  • 2023/2024
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Positive externality in production



In a free market situation,
individual firm takes int
account only its private co
and benefits and not thos
wider society. SMC>PM


PMC>SMC In a free market, a firm will
ignore benefits to third parties and
produces at Q1. However, the socially
efficient level will be at Q2, where
PMB=SMB




Positive externality in consumption EXTERNALITIES
In a free market, we get Q
But at this output, the socia
cost is greater than SMB
efficiency occurs at a lowe
(Q2) where SMB=SM

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