6/5/14
“Externalities”
Think of a time when you did something or had a conversation
that had an unintended consequence:
1. What did you intend to do
or say?
2. What was the unintended
consequence of your action?
www.notorious-rob.com
“Externalities”
www.notorious-rob.com
What did you intend to do?
Unintended consequences
6/5/14
Econ. Agenda
1. What are economic externalities? (class notes)
2. Externality activity (in partners)
3. HW
HW: Obama climate plan article
• Read & directed notes
• Answer questions relating to externalities at the end
6/5/14
Class notes – economic externalities
externality (n.)
• Unintended side effect or consequence of economic
activity…
• that affects other parties…
• without being reflected in the cost of the goods or
services involved.
6/5/14
Class notes – economic externalities
Positive externality example:
• Beekeeper raises bees to produce honey, which she sells
at the farmer’s market.
www.citygirlfarming.com
www.littleecofootprints.com
www.timesunion.com
• Costs of production for beekeeper:
• Price of honey at farmer’s market:
• EXTERNALITY (positive):
• Beekeeper’s bees pollinate surrounding
flowers…
www.solutions-site.org
6/5/14
Class notes – economic externalities
Negative externality example:
• Farmer produces bananas in Peru so you can have them
all year round.
www.wallpapersdesign.net
foncho.fairtrade.org.uk
thisorthat.com
• Costs of production for bananas:
• Price of bananas at grocery store:
• EXTERNALITY (negative):
• Burning jet fuel releases CO2 into the
atmosphere, causing increase in global warming…
www.bookwormroom.com
6/5/14
Class notes – economic externalities
Externalities can occur at any of the 5 Stages of Production
Process:
1. Extraction
2. Production
3. Distribution
4. Consumption
5. Disposal
6/5/14
Externality activity
• In pairs, discuss the production process for your good and
determine the externalities that might occur at each stage.
1. Hershey’s chocolate bar
2. Apple i-phone
3. Camel cigarettes
www.hersheys.com
www.apple.com
www.camel-cigarettes.com
6/5/14
Class notes – economic externalities
externality (n.)
• Unintended side effect or consequence of economic
activity…
• that affects other parties…
• without being reflected in the cost of the goods or
services involved.
Hershey’s chocolate bar
Apple i-phone
Camel cigarettes
www.hersheys.com
www.apple.com
Extraction:
Production:
Distribution:
Consumption:
Disposal:
www.camel-cigarettes.com
Economic externalities discussion:
1. Who is “paying” for these economic externalities now?
2. Who should be paying for these economic externalities?
How might this work?
HW: Obama climate plan article
• Read & directed notes
• Answer questions relating to externalities at the end