CANDIDATE NAME : TINASHE NYANYIWA
CALA NUMBER : 2
CENTRE NUMBER : 010012
SUBJECT : ECONOMICS
TITLE : EXTERNALITIES
SYLLABUS TOPIC : GOVERNMENT
INTERVENTION IN THE ECONOMY
PART A
1ai) Identify 5 negative externalities in my community.
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Air pollution
Water pollution
Land pollution
Congestion
Land degradation
ii) Clarify the externalities as a source of market failure?
Market failure exists whenever a free market, left to its own devices and
totally free from any form of government intervention, fails to make the
optimum use of scarce resource.
To begin with, there are externalities of production. Negative production
externalities: These are spillover effects that occur as a result of
production activity.A common case is that of most forms of
environmental pollution. Suppose a firm disposes of chemical waste into
a river. A production externality occurs because there are additional
costs imposed on the community and the river authority who have to
clean up the mess, due to the negative consequences of the firm’s
action. There is little or no cost to the polluting firm. Positive production
externalities: These are benefits to third parties and are created by
producers of goods and services. A typical example is when, as a result
of medical research, a new drug or vaccine is developed to combat a
serious disease. The recipients of the medication obviously benefit; but
there are also wider benefits to others and to the economy as a result of
the reduced incidence of the disease.
To add on, Consumer externalities arise when the activities of a
consumer affects another consumer. Negative consumption externalities:
These are created by consumers as a consequence of their use of
products that result in harm to others who are not involved in the
consumption. A very relevant and topical global example is that of
passive smoking. This causes costs to non-smokers in the form of
discomfort and respiratory problems where there is extensive exposure.
Another example is the increased CO2 emissions that are generated by
coal-fired power stations, aircraft , heavy industry and so on. It is now
very clear that these are a cause of global warming.
A Coal- fired Power Station in China
Positive consumption externalities: Here, the benefits are the spillover
effects of consumption of a good or service on others. This is a key
argument for the provision of merit goods by a government. In the case
of secondary education, those students who receive it clearly benefit
from it. Their employment opportunities are greater and they can expect
higher pay due to their educational background compared to others who
left school earlier. The benefits further extend to their families and to
future economic prospects.
PART B
b) Make a survey on the impact of any of the externalities provide
evidence.
Air Pollution
The Smoke released by industries and factories is harmful to the
environment. As a result it leads to Air pollution which contaminates the
atmosphere. This doesn't stop here, Air pollution also leads to global
warming and this damages crops and human life.
WATER POLLUTION
The contamination of water bodies is a major threat to human and
aquatic life.The water is unsafe for consumption as a result plants and
animals cannot survive. Human life is also at risk for water borne
disease which breed in polluted water bodies. In Zimbabwe we have had
an increase in thecases of cholera due to water contamination.
LAND POLLUTION
Land pollution is caused by unlawful dumping of waste which is harmful
to the environment. These actions then lead to a polluted Land which
attracts diseases and damages the aesthetic of nature. A polluted land
also leads to bad smell. In Harare CBD land pollution has been
increasing due to the dumbing of litter in certain parts of the city.
TRAFFIC CONGESTION
Traffic Congestion is when vehicles block traffic movement and this
leads to violence on the street, people not reaching their destination in
time and noise. Congestion is one of the most common negative
externality in morden cities as it has a negative impact on the third party.
LAND DEGRADATION
Human activities such as mining have had a negative impact on the land
leaving it bear and degraded. These human actions have affected the
overall quality of soil, water and vegetation conditions. In Shamva
(Zimbabwe) the land has degraded because of unlawful gold panners.
PART C
c) Use any method of representing data to analyze the impact of the
causes of negative externalities.
The above pie chart represents the percentage impact of the causes of
negative externalities.