00:01
So here we're having a discussion about the economics of fire extinguishers.
00:04
And very simply, the fire extinguishers exhibit positive externalities.
00:08
They help others besides yourself, right? if you use your fire extinguisher to put out a fire, it might save your house, but it would also save your neighbor's house.
00:18
Because if your house burned down, the neighbor's house would also catch fire, right? when you put out fires in your community or your house, that is also really good for people who own the house next door to you, right? so they're getting a positive externality.
00:32
If we draw the market for fire extinguishers then, right? we would have an upward sloping supply curve, a downward sloping demand curve.
00:41
And this means now we have to think really careful about the social cost.
00:47
So the social cost here is less than the private cost because of the positive externality, right? maybe this thing causes, you know, costs $10 to manufacture, but it confers $2 of benefits on other people.
01:04
So the real cost of society is only $8.
01:07
So the social cost will be below the actual cost curve...