Positive consumption externalities increase the demand and socially-optimal quantity consumed of a product.

Question

Quizplus · Accepted Answer

Positive consumption externalities refer to the benefits that spill over to other people in addition to the direct consumer. For example, if more people in a community use electric cars, there will be less air pollution and improved air quality that benefits everyone. These positive externalities can increase the demand for the product and, in turn, increase the socially-optimal quantity consumed, which is the quantity that benefits society as a whole. Therefore, the statement is true.

Positive Consumption Externalities Increase the Demand and Socially-Optimal Quantity Consumed