How externalities are reciprocal in nature. explain with example?
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An externality occurs when one person or firm's action affects another entity without permission.
An externality can also exist when the consumption and production choices of one person or firm enter the utility or production function of another entity without that entity's permission or even compensation.
Magical reciprocal Externalities, An example of this is when people who enjoy smoking but do not enjoy inhaling smoke that has been exhaled by another smokers respond to other's smoking by smoking themselves.
An Intra - marginal, Uni Directional externalities, A lake may e unsuitable for swimming if too much of certain types of effluents are discharged in to it but it may be able to accommodate a large inflow of additional effluents and hence the marginal adjustments in the out flow over a certain range do not alter the extend of the damage.
An externality can also exist when the consumption and production choices of one person or firm enter the utility or production function of another entity without that entity's permission or even compensation.
Magical reciprocal Externalities, An example of this is when people who enjoy smoking but do not enjoy inhaling smoke that has been exhaled by another smokers respond to other's smoking by smoking themselves.
An Intra - marginal, Uni Directional externalities, A lake may e unsuitable for swimming if too much of certain types of effluents are discharged in to it but it may be able to accommodate a large inflow of additional effluents and hence the marginal adjustments in the out flow over a certain range do not alter the extend of the damage.
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