Caose Theorem

4. What are externalities, and how do they typically affect the price of a good or service?

As for external factors one of the external factors would be perhaps a new law that is given and affects directly or indirectly the business and that business needs to make some changes.

If tuition is held below equilibrium price, demand will surpass supply. A price below equilibrium is called a price ceiling. Benefits inure to the consumers who get to obtain the tuition at lower cost, and other suppliers also benefit because demand exceeds supply, and buyers will move to substitutes, regardless of price. Excess buyers who want

Negative externalities are costs imposed upon an individual or group that is outside or external to a transaction.

A ____________ externality exists when third parties are benefited by a transaction that they did not directly undertake.

Prices in a market economy are very important. Price allows us to give out goods appropriately to those who are able to pay.

The result is an unfair distribution of impacts that does not maximize social surplus. Weimer and Vining call externalities a “missing market” (p. 92). It is feasible to imagine externalities being accounted for by a private market, in cases where, for example, an externality is manifested into a change in land value. However, these cases are exceptional. Governmental must typically step in to value externalities, such as charging fines for polluting industry, in order to account for social costs and benefits.

Negative externalities are detrimental third-party effects caused by the production and/or consumption of a good. A public good is a good provided free of charge to the consumer, by the government. A public good is non-excludable and non-rivalrous. A merit good is a good that gives positive externalities upon production and/or consumption. A merit good is non-excludable, yet rivalrous.

External influences cover a wide variety of factors, and their influence can differ between business types. These include the following:

III. EXTERNAL ENVIRONMENT A. Societal Environment Economic Opportunities George W. Bush has been elected as the new President of the United States. One of his goals is to implement a tax-relief program that will help stimulate consumer spending (Bush). This could increase the amount of air traffic if consumers choose to spend this unexpected income on travel. This could then boost airline revenues and allow for more completed purchases on Boeing's commercial aircraft.

Extrinsic/External Rewards are rewards given by another person, such as company bonuses, to motivate employees.

(C) Externalities -- Companies produce some type of external cost that affects the community. The company would not voluntarily reduce or

An Externality is when costs or benefits of certain activities spill or fall into third parties that have nothing to do with the initial situation in hand; its like a side effect or consequence of an activity that affects other parties who did not choose to incur that cost or benefit.

External Opportunities (O) such as political, social and cultural changes, new product, increased demand, government policies, changes in technology and current and future economic conditions

externalities keep the market from reaching allocative efficiency because the gains or losses generated are external to the pricing system; they are unpriceable. The transaction costs of externalities misallocation of resources or a failure of the market economy to generate a Pareto optimum. positive externalities 3 types of interventions the government may engage in: