External Benefits

What can the flu teach us about economics and externalities? In this video, we go over how vaccines produce positive externalities that help people stay healthy.

What can the flu teach us about economics and externalities? In this video, we go over how vaccines produce positive externalities that help people stay healthy. When someone receives the vaccine, they pass along the positive benefits of the vaccine to others, generating positive externalities. However, when someone gets a vaccine, they bear all of the costs and only reap some of the benefits of the vaccine. The social value is larger than the private value, resulting in an an undersupply of flu shots. One solution to this problem is a Pigouvian subsidy — a subsidy on a good with external benefits.

Download
Options
Translate Practice Questions

Contributed Content (0)

Ask a Question

 
Show 1 Answer (Answer provided by Mary Clare Peate)
user's picture

Good questions! PD- There was indeed missing text to the second scenario of the practice questions, but it should be there now. Thanks for alerting us! Ana, 'girls in the classroom' does not provide an external benefit because, according to the research cited in the question, they are simply better behaved rather than actively increasing their peers’ ability to learn. Better behaved just means that other students around them can learn the material from the teacher without interruption. According to the limited research cited in the question, it would make no difference to a student’s ability to learn if a particular girl were in the classroom or not in the classroom (and assuming she was not replaced by a boy). In both instances, a student would be able to learn the material from the teacher without interruption. Again, this is according to the research cited in the question. There may be other research that finds girls actually increase the educational attainment of their peers through active participation etc., but this was not cited in the question.

Please register or login to answer a question
 
user's picture
 
Please register or login to answer a question
Please register or login to ask a question