Question

Differentiate between Private and Social cost. In 500 words

Answer 1

Answer:

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Explanation:

The difference between these two is that private costs are only one part of overall social costs. Social costs take into account not only private costs, but also the externalities that come as a result of a given economic decision. Private costs are the costs with which we are all familiar.

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Answer 2

Answer

Private costs are those expenses we all have to pay. If I run a business, some of my private costs would be the costs associated with the electricity I use, the salaries I pay my employees, the taxes I pay, and the materials I use to produce my products.

Social costs include both private and external costs. External costs could include any costs associated with pollution that could occur as a result of my business. The neighborhood where my business is located may be less desirable in which to live because of increased traffic or increased noise resulting from my business. These external costs may or not be paid for by me as the business owner. If a person’s home value dropped as a result of my business, that person could receive less money from the sale of his or her house. Also, the city might have to pay to clean up the effects of any pollution caused by my business or might have to repave the roads due to increased traffic caused by my business.

Thus, private costs are usually less than social costs because social costs include external costs while private costs do not.

Explanation:

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