• What are Externalities? They're like uninvited guests at a party! When a company does something (like making things), it sometimes affects people who didn't ask for it
• Positive Externalities: Benefits that others enjoy without paying for them. Like when your neighbor plants beautiful flowers, and you enjoy the view without doing any work!
• Negative Externalities: Costs that others face without being compensated. Think of a factory polluting a river; the fish don't like it, and neither do the fishermen!

Types of Externalities

• Production Externalities: Happen in the making of goods.
• Consumption Externalities: Occur when goods are used.

Now, let's dive into specific cases!

• Example: Factories using fossil fuels, causing pollution and global warming.
• Real-world Issue: Rising sea levels, extreme weather, health problems.
• Problem: More steel produced than needed, causing a loss in welfare (like wasting money on things we don't really need).
• Visualize: Imagine the Earth coughing every time a factory puffs out smoke. Not fun, right?

• Example: Drinking alcohol and the risks of violence, drunk driving, etc.
• Real-world Issue: Lower productivity at work, danger on the roads.
• Problem: More alcohol consumed than should be, causing social issues.
• Visualize: Picture a party that goes too wild, leading to a messy house and angry neighbors. Oops!

• Example 1: Apple orchards and beekeepers benefiting each other.
• Example 2: Building infrastructure like roads and airports.
• Real-world Issue: Developing countries struggling with poor infrastructure.
• Problem: Fewer apples produced than should be, causing a loss of benefit to society.
• Visualize: It's like having a road that ends too soon; everyone wants to keep going, but they can't!