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 above figures. Prior to the shift of the curves, which panel and which curve involve the existence of negative externality?
Definitions:
Cash Discounts
A reduction in invoice price offered by sellers to buyers as an incentive for early payment.
Credit Terms
Conditions under which credit is extended by a lender to a borrower, including payment due dates, interest rates, and repayment schedules.
Credit Period
The time frame granted by a creditor within which payment for a purchase must be made; typically used in commercial transactions.
Credit Risk
The risk of loss resulting from a borrower's inability to repay a loan or meet contractual obligations.
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