Which of the following is the best example of a...

Which of the following is the best example of a macroeconomic externality? One person saving less without considering the effect on their retirement needs Many people saving more without considering the effect on unemployment One person starting a business without knowing whether the goods will sell One person spending more in order to help stimulate the economy

Labs

Want to see this concept in action?

NEW

Explore this concept interactively to see how it behaves as you change inputs.

View Labs

Transcript

00:01 So here we're thinking about positive and negative externalities, right? the general idea here is if i sketch it, right, in general we're thinking of markets.

00:10 Markets are stories about quantity and price, demand, and supply.

00:15 And normally that will deliver here.

00:17 But if you have a positive externality, right, i'm going to say that that's in green.

00:24 Positive externality, that means, for example, that we get more value than, right, is the individual, right? the demand curve tells you how much the individual is willing to pay for it.

00:38 But if there's a positive externality, when you buy it, other people benefit as well.

00:43 So here, right, you would get a market allocation, but here is where society wants to be, right? that's the optimal.

00:54 When people really like this thing, we want more of it.

00:58 And conversely, when people really don't like this thing, we want less of it.

01:01 So a is nice landscaping.

01:06 This is obviously a positive externality, right? many people can benefit this from this.

01:11 When, what's his name? jerome landscapes his lawn.

01:15 He enjoys it, but many other people enjoy it as well, right? they get to look at his lawn.

01:19 They get to feel like they live in a nice neighborhood.

01:22 So this means there is going to be too little...

Question

Please give Ace some feedback