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Chapter 13: Q.1 (page 315)

Do market demand curves reflect positive externalities? Why or why not?

Short Answer

Expert verified

No, the market demand curve reflect only the private benefits received by the consumer.

Step by step solution

01

Content Introduction

Positive externalities benefit a third party or parties that did not purchase the product or service that generated the externalities.

02

Content Explanation

A market demand curve, on the other hand, does not show positive externalities because it solely reflects the private advantages obtained by the product's consumers. Positive externalities generate societal benefits, which a market demand curve captures.

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