Question

Internalizing a positive externality will cause the demand curve to:______. a. shift up. b. remain unchanged. c. shift down. d. become more elastic.

Answer 1

Answer:

a. shift up.

Explanation:

Positive externality refers to one's action providing benefit to the other person without any direct intention and motive but with following the general practice of being ethical.

When this is brought in the internal structure then the demand for such products would increase. As this provides for good and improved customer service without any direct intention to increase the monetary income of the organization.

This clearly is a positive boost for the organization.

Thus, this will increase the demand and will tend to move the curve towards right or up.