Negative and Positive Externalities

We have been studying the topic of negative and positive externalities in Economics and Business.  I came across the following news items which apply well to the topic:

1. The Green Bus

The Green Bus company is the UK leader in home to school transport and is currently subsidised by the Public Transport authority Centro. As a result, the bus service is able to offer half price journeys to and from school aiming to reduce car usage and therefore promoting positive externalities. The authority is proposing to cut the subsidy to the Green Bus company by 50%, moving it in line with subsidies given to other operators. The subsidy is arguably creating unfair competition in the bus services market because the Green Bus company is able to provide the bus services at a much lower price than its competitors. However, those opposing the reduction state that the increase in cost of the school bus service will negatively impact on the finances of many families in the West Midlands. Further news on the final decision will be announced shortly….

2. Red Meat

According to researchers at Harvard Medical School, a diet high in red meat can lead to health risks including cancer and heart problems, shortening life expectancy more than previously thought. Too much consumption of this product is arguably causing negative externalities.  As a result, the demand for red meat is likely to fall significantly, as people are more conscious of the health risk. It has also been stated that there is an argument that people should avoid eating processed meats altogether. Consequently, these industries will suffer from decreased sales. Those benefitting from the news will be those supplying substitutes, such as non red meats and vegetarian dishes. However, the National Beef Association believes that the UK public has largely dismissed claims that consumption of too much red meat can cause adverse health effects and shorten life expectancy. People are constantly told what to eat and what not to eat and have largely chosen to ignore the advice given, choosing instead to continue eating red meat as part of a balanced diet. Therefore, the effect of the report on the red meat industry may not be as significant as might be expected.

By Emma Stevens Upper Sixth

One Response to “Negative and Positive Externalities”

  1. Kam SanghaMarch 20, 2012 at 12:11 pm #

    Examples of positive and negative externalities are all over the news at the moment. I just read about the governments proposal to improve England’s ailing road network, by bringing in private investors to run and maintain existing routes and build new ones.Traffic congestion costs the UK economy about £7bn a year. One way is for private companies to charge motorists tolls for using roads that have had improvements like extra lanes or remodelled junctions. Whether the motorist would be happy to pay as is the case in Europe is a differnt matter. Environmental campaigners want greater investment in public transport alternatives.

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