Question

Please answer the following questions to describe an instance in which you, an acquaintance, or family member has experienced an externality. Please use economic concepts, and use references in your main contribution.
1. How did it affect you (or your acquaintance or family member?) Please explain.
2. What were the effects? Please explain.
3. Did you (or your acquaintance or family member) experience increased or decreased health or quality of life? Please explain.
4. If you choose to write about a negative externality such as pollution, what do you think is the best way to reduce pollution? Please explain.
5. If you choose to write about a positive externality, what is the economic problem that positive externalities create? How would your resolve that? Please explain.

Answer 1

Answer:

The externality that affected me was the U.S. recession of 2018.  

Explanation:

The externality is the term that refers to a variation in a outside factor that end up affecting persons involve in a business that is not related directly to the outside factor that changed.

1. The 2008 recession made harder for me to get a job in the restaurant sector even though the prices of the restaurants and hotels continued to be the same, many person have to cut their expenditure in tourism as the recession significantly impacted the financial institutions and many persons were laid off from their jobs which decreased consumption.  

2. The effects of the recession were: increase in the unemployment, decrease in the consumption, increase in foreclosures.  

3. I experienced decrease in my quality of life as it was harder for me to keep a job for a long time. Most of jobs were part time therefore it was a time where I have to live on my savings.

4. Pollution is best reduced if companies take conscience of the fact that they have a greater impact on the environment than individuals. This will lead to better business practices in the manage of residuals and raw materials.  

5. A positive externality can create a bubble in the prices and overestimate the actual value of an asset e.g. cryptocurrencies bubble was a positive effect for some investor that really knew the value of this securities but in the long run it created a bubble and people that did not know about cryptocurrencies invested and lost most of their money.