What do u think about external diseconomies and external economies when there are the largest gang...

What do u think about external diseconomies and external economies when there are the largest gang near your home?

Give some example

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Expert Solution

External Economies - These refer to the kinds of benefits that we receive by some other person's actions and the producer of this action is not paid or compensated. These are also called positive externalities. These are the benefits that we receive from any external source of action. These increase the welfare of the person.

Exeternal Diseconomies - These refer to the kind of harmful effects or disadvantages that we receive by some other person's actions and the producer of such harmful actions is not punished or fined/ penalized. These are also referred to as negative externalities. These are the harmful effects/ discomfort that we receive from any external source of action, as the name says, externality. These decrease the welfare of the person.

Example of external economies - Your neighbour has grown a beautiful garden infront of his house and you can see that garden from your balcony, you get a positve feeling, a sense of delight/ benefit of seeing beauty whitout paying anything to your neighbour. This is called external economies.

Example of external diseconomies - When any business or a factory dumps all their waste products and factory residue in the air and in the water. This in turn creates a lot of pollution, but unfortunately, the people around these factory can't go and penalise/ fine them for their wrongdoing. This is called a external diseconomies.

Hope it helps. thanks :)

Rahul Sunny answered 2 months ago

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