Understanding Positive Externalities and Market Failure

The video explains positive externalities, focusing on how they create a divergence between private and social costs and benefits, leading to market failure. It discusses positive production externalities using renewable energy as an example, highlighting the higher marginal private cost compared to social cost. It also covers positive consumption externalities, using education to illustrate how social benefits exceed private benefits, leading to underconsumption. The video emphasizes understanding the theory behind these concepts rather than focusing on diagrams.

What are the consequences of individuals not recognizing the benefits of positive externalities?

How does the misallocation of resources occur due to positive externalities?