Question

Many governments have created policies on which travelers are required to be in quarantine hotels that they managed, some policies on which stipulates that they pay the cost of what they consume while they are in quarantine, some don't. Can we consider it a negative externality, if taxpayers of the said country pay for the traveler's costs, for those countries who do not require travelers to pay for their quarantine since it is the cost imposed on the society even if they are not the one traveling themselves? Why or why not? Kindly comprehensively explain.

What if a government that won't let the travelers pay before, let them pay now, will it remove the externalities/external cost (assuming that the answer to the previous question is a yes, it is an externality), since the taxpayers will no longer be burdened by the taxpayers/society, or will it internalized externalities, as the travelers are paying for the externalities that they have cost or even both? How does it affect the supply and demand then? Will supply shift to the left, closer to the social cost, or will it shift the supply to the right as externalities have been reduced?

Answer 1

Yes, it will consider negative externality. Negative internity occur when it will create harmful effect on the third party. The reason behind it that the society will have to pay the cost of it.Government makes many policies for people who travels from one country to another. If government said no need to pay the cost by travellers, it will impose burden on the people of the country. Imitate the example of covid-19 where many country adopt lockdown to avoid the risen of patients, and there is recession in the entire world it is not easy for the people to pay the tax for the third party.

Now if you government let the travelers pay, it will result in the internalized externalities. No doubt it will remove external internalities. It is also called positive externality it will increase the social benefit of economic activity so and adjusted demand/benefit curve would lie farther left on the diagram, reflect a lower social price at each quantity. So in simple words negative externalities increase social cost, supply will farther to left. A positive externalities increase the social benefit, demand would lie farther left on the diagram.