An externality affecting demand can be measured graphically as the

Question

Quizplus · Accepted Answer

An externality affecting demand occurs when there is a shift in the demand curve due to the positive or negative impact of the externality. This shift can be seen graphically as the vertical distance between the market demand curve (representing private benefits) and the social demand curve (representing social benefits). The market demand curve shows the quantity demanded by consumers at different prices, while the social demand curve shows the quantity that society would demand at different prices, taking into account the external costs or benefits associated with the good or service. Therefore, the correct choice is B, as the vertical distance between the market demand curve and the social demand curve captures the impact of the externality on demand.

An Externality Affecting Demand Can Be Measured Graphically as the