A shift from S₁ to S₂ reflects the change that happens when a negative externality is taken into account. A shift from D₁ to D₂ reflects the change that happens when a positive externality is taken into account.
-Refer to the above figures. If a positive externality that existed becomes corrected, price and quantity will become
Definitions:
Differentiate Product
Differentiate product involves creating distinctions between products, typically to make a product more attractive by highlighting its unique features compared to competing products.
Prospect Theory
A behavioral economic theory that describes how people decide between alternatives that involve risk, valuing losses and gains differently.
Reference Price
A baseline price used as a comparison point for consumers when evaluating potential purchases.
Natural Disasters
Severe and sudden events caused by environmental factors that result in significant damage and loss.
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