CAS EC 101 Lecture Notes - Lecture 40: Social Cost, Externality, Everytime

• School: Boston University
• Department: Economics
• Course: CAS EC 101
• Professor: Bruce Watson

Document Summary

The consumption of a good or service causes affects a third party"s situation. Marginal private benefit (mpb): the benefit that the person gets for each unit of consumption. Marginal social benefit (msb): the benefit to society (including the person consuming the product) When a person smokes, it benefits the person by giving them satisfaction by alleviating their addiction. However, the smoke harms the people around that person who was not involved in the process of consumption. Each pack of smoke costs the society one dollar. So the marginal social benefit will be one dollar less than the marginal. The msb curve will be everywhere below the mpb curve (msb