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By the end of this section, you will be able to:

  • Explain and give examples of positive and negative externalities
  • Identify equilibrium price and quantity
  • Evaluate how firms can contribute to market failure

From 1970 to 2012, the U.S. population increased by one-third and the size of the U.S. economy more than doubled. Since the 1970s, however, the United States, using a variety of anti-pollution policies, has made genuine progress against a number of pollutants. [link] lists the change in carbon dioxide emissions by users of energy (from residential to industrial) according to the U.S. Energy Information Administration (EIA). The table shows that emissions of certain key air pollutants declined substantially from 2007 to 2012; they dropped 730 million metric tons (MMT) a year—a 12% reduction. This seems to indicate that progress has been made in the United States in reducing overall carbon dioxide emissions, which cause greenhouse gases.

(Source: EIA Monthly Energy Review)
U.s. carbon dioxide (co 2 ) emissions from fossil fuels consumed 2007–2012, million metric tons (mmt) per year
Primary Fossil Fuels Purchased Electric Power Total Primary Fossil Fuels
End-use Sector Coal Petroleum Natural Gas
Residential (0) (14) (31) (134) (179)
Commercial (2) (2) (7) (126) (136)
Industrial (40) (62) 31 (118) (191)
Transportation 0 (228) 5 (1) (224)
Power (464) (36) (122) - -
Change 2007–2012 (508) (342) 121 (378) (730)

Despite the gradual reduction in emissions from fossil fuels, many important environmental issues remain. Along with the still high levels of air and water pollution, other issues include hazardous waste disposal, destruction of wetlands and other wildlife habitats, and the impact on human health from pollution.


Private markets , such as the cell phone industry, offer an efficient way to put buyers and sellers together and determine what goods are produced, how they are produced, and who gets them. The principle that voluntary exchange benefits both buyers and sellers is a fundamental building block of the economic way of thinking. But what happens when a voluntary exchange affects a third party who is neither the buyer nor the seller?

As an example, consider a concert producer who wants to build an outdoor arena that will host country music concerts a half-mile from your neighborhood. You will be able to hear these outdoor concerts while sitting on your back porch—or perhaps even in your dining room. In this case, the sellers and buyers of concert tickets may both be quite satisfied with their voluntary exchange, but you have no voice in their market transaction. The effect of a market exchange on a third party who is outside or “external” to the exchange is called an externality    . Because externalities that occur in market transactions affect other parties beyond those involved, they are sometimes called spillovers .

Externalities can be negative or positive. If you hate country music, then having it waft into your house every night would be a negative externality    . If you love country music, then what amounts to a series of free concerts would be a positive externality    .

Questions & Answers

what is trade by batter
Iko Reply
trade involves the transfer of good or services from one person to another, often in exchange for money.
Now trade by batter :it may define as form of trading in which good are exchange directly for other goods without the use of money as medium of exchange
is it good to trade with something with a value but given something which has no value
trade in batter means the exchange of goods and services without using money
mention six factors that explain efficiency and productivity of labour
fanelchainz Reply
mention six factors that explain efficiency and productivity of labour
factors that explain efficiency of labor are 1.population, 2.technology, 3.education, 4.working environment, 5.incentives (tax holidays) and 6.religious or cultural beliefs.
What is demand
SoFIA Reply
is the abulity and willingness of a consumer to purchase goods and services at a particular peeiod of time in a given price
what is a central bank
Fadhil Reply
what is elastic
fadoju Reply
how is equilibrium defined in financial market?
infinity Reply
what is the definition of money
Money is define as anything that is generally acceptable as a means of exchange nd settlement of dept
what is elastic
what is demand and supply
demand is ability of a consumer to purchase a particular good at a particular time
supply is the ability of a person to be able to provide his costumers with what they need
how do choices end up determining what, how and for whom goods and services are produced
Ayesha Reply
They end up by using the scale of preference
there are 10 000 seats available for the Wimbledon tennis Championships. the price per ticket is fixed by the organisers. the supply of seats is thus: A. completely elastic B. completely inelastic C. elastic D. unitary elastic E. elastic which option is the answer?
Esihle Reply
what is international trade
Naomi Reply
the trade between two or more countries outside the territory of own country
it's an international trade
Multilateral trade it is
how do monopolistic firm make profit in the short run and long run
Ediga Reply
oligopolistic competition is known to have a kinked demand curve .why there is such a tease my in oligopolistic form only
please can anyone help me in econs
Manuel in which context
please in utility
what is demand ?
Tonight Reply
The amount of some goods or services consumers need to purchase
The amount of goods or services that consumers are willing and can afford to purchase.
it is goods and services consumers are willing and able to buy at given price over a given period of time
as quantity of good and service that a consumer is willing and able to purchase at a given price and at the particular market price.
The amount of goods and services consumers are able and willing to buy and pay for at a given price and at given point in time.
refers to the quantity of goods and services that customers are willing and able to purchase at various prices over a period of time
Demand may define as goods and services which a consumer is willing to buy at a given price over a perticular market price
what are subsidies
Yaya Reply
how do trade unions deal with subsidies
bro can you explain decision making
Decision making is a process to use your limited resources for best productive purpose.
explain why an increase in national income may not always lead to improvement in economic wellbeing of all the citizens?
How many types of labour do we have pls
skilled and unskilled labour
Thanks 🙏
what are the factors that affects efficiency of labour ?
What are tools of economics analysis
Adu Tumwah,,, The tools of economics analysis are; Charts, graphs, equations, table, arithemetic mean, etc.
Subsidies are payments made by the government to the producers of goods and services
what is the marginal revenue if p=10-2q
Karen Reply
what's the difference between demand goods and supply gooda
Spiff Reply
why is 2% the optimal inflation rate in many countries
why is 2% the optimal inflation rate in many countries
what's inflation
Thando Reply
a general rise in the prices of services and goods in a particular country
why is 2% the optimal inflation rate in many countries?
resulting in a fall in the value of money,,
for example
Inflation is the continuous rise of price of goods and services in a nation
persistent increase in the general price level

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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