Internalising an externality
Internalising an externality
An externality is a cost or benefit affecting a third party that is not included in the market price. Internalising an externality means making the producer or consumer bear the full social cost or benefit, so the price reflects the effect on third parties.
Step-by-step lessons on OCR GCSE Economics 3.8.2 Policies to correct externalities. Each one builds up to exam-style questions. Build a solid grasp of supply and demand and cost/revenue calculations before tackling the evaluation-heavy policy topics.