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Graphical Representation of a Positive Externality
A positive externality is illustrated on a supply and demand graph where the marginal social benefit (MSB) curve lies above the marginal private benefit (MPB) curve, which is represented by the demand curve. The vertical distance between the two curves represents the marginal external benefit. The market equilibrium occurs where the MPB curve intersects the supply curve (marginal social cost), resulting in a quantity that is less than the socially optimal quantity, which is found at the intersection of the MSB curve and the supply curve. The area between these two quantities, bounded by the MSB and supply curves, represents the deadweight loss to society due to underproduction.
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Economics
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The Economy 2.0 Microeconomics @ CORE Econ
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Market Failure due to Positive Externalities
Marginal Social Benefit (MSB) vs. Marginal Private Benefit (MPB)
Corrective Subsidies for Positive Externalities
Positive Production Externality
Graphical Representation of a Positive Externality
Examples of Positive Externalities
Positive Externalities: Social vs. Private Benefit
Positive Consumption Externalities
Solutions for Positive Externalities
Types of Positive Externalities
The Beekeeper and the Orchard
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Market Outcome of Public Health Measures
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