Cool Economics Examples-Externalities

Mr. Clifford from ACDC Econ introduces the concept of externalities using Axe body spray as an example. He explains that externalities occur when a transaction affects someone other than the buyer or seller. Positive externalities provide benefits to others, while negative externalities impose costs. A commercial is used to illustrate these concepts, showing how a person benefits from Axe without purchasing it, and how others might experience costs. The video aims to clarify these economic concepts with practical examples.

What is an externality in economic terms?

• A personal benefit or cost from a purchase

• A cost or benefit that affects others not involved in the transaction

• A direct payment made to a seller

• A discount received on a product

In the context of the Axe example, what would be considered a positive externality?

• Others enjoying the scent of Axe without buying it

• The buyer disliking the scent of Axe

• The buyer receiving a discount on Axe

• The buyer enjoying the scent of Axe

What is a negative externality as demonstrated in the Axe example?

• The buyer receiving compliments on the scent

• The buyer enjoying the scent of Axe

• Others disliking the scent of Axe without buying it

• The buyer disliking the scent of Axe

In the commercial example, who experiences the external benefit?

• The girl in the elevator

• The person who dislikes the scent

• The person who made out with the girl in the elevator

• The person who bought the Axe

What is the external cost shown in the commercial example?

• The buyer enjoying the scent

• The buyer receiving a discount

• The person in the elevator disliking the scent

• The person in the elevator enjoying the scent