Draw a Graph to Illustrate the Market Equilibrium and the Social

question 36

Essay

Draw a graph to illustrate the market equilibrium and the social optimum in the case where there is a positive externality due to underconsumption.Explain the relative positions of the two demand curves.

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Definitions:

Reciprocity Principle

A social norm suggesting that people should respond to others' actions with similar actions, leading to positive social exchanges.

Minimax Principle

A strategy in decision-making and game theory aimed at minimizing potential losses while maximizing potential gains.

Similarity Principle

The psychological theory that people are attracted to others who are similar to themselves in various aspects.

Tend-And-Befriend Responses

A behavior exhibited under stress, especially by females, to seek out social alliances and nurture rather than engage in fight or flight.