A positive externality occurs when the production of a good has benefits that spill over onto other people who did not pay for those benefits.
Negative externalities occur when the consumption of a good imposes costs on third parties who did not choose to consume the good themselves.
what is meant by minimum price
The lowest price a good can be legally sold for.
E.g. Scotland’s minimum price on alcohol is 50p per unit of alcohol.
private costs
cost to an individual or firm of an economic transaction
What is meant by: Positive consumption externalities
occurs when consuming a good cause a positive spillover to a third party lying outside the transaction
What is meant by: Positive production externalities
when the production of a good or service itself results in benefits to third parties—for example, when a company tears down an abandoned building and constructs a new office or apartment building that enhances the surrounding community.
