Airports Externalities
Airports Externalities
Hamed Al Busaidi
MBA723 – Managerial Economics
Prof. Ed DeJaegher
February, 9, 2014
1. Introduction This academic paper explains the meaning of externalities in economics science and how they generate the benefit to the society as positive externalities or create some costs which are not taken in account while developing the project as negative externalities. The paper also describes the airports as one of the basic infrastructure affected by externalities. In the end, the relation between externalities and willing to pay is clarified.
2. Definition of Externalities
Externalities in economics are the costs or benefits that are not considered in the market price of goods or services because they are not included in supply price or the demand price (“Economic Glossary”, n.d.). They are the consequences of industrial or commercial activities which affect other parties (“Oxford Dictionary”, n.d.). In details, externalities are the third party impacts occurring from the production and/or consumption of goods and services for which no reparations are paid. In the case of the external benefit is generated, it is called “positive externality”. In contrast, it is called “negative externality if an external cost is created. The high effects of negative externalities could create inefficient economy or market failure. In economics, for any project there is a social cost which is the summation of the private cost of the project and the externalities. For example; the industrial companies/ factors throw the wastage in the river or beside a residential area which create negative externalities for other firms and consumers in terms of cleaning up and human health (“tutor2u”, n.d.).
3. Airports externalities
The airports are the one of the basic infrastructure of the countries in the world. It provides one of the essential economical transporting systems inside and outside the country. There are many factors affect on how
Hamed Al Busaidi
MBA723 – Managerial Economics
Prof. Ed DeJaegher
February, 9, 2014
1. Introduction This academic paper explains the meaning of externalities in economics science and how they generate the benefit to the society as positive externalities or create some costs which are not taken in account while developing the project as negative externalities. The paper also describes the airports as one of the basic infrastructure affected by externalities. In the end, the relation between externalities and willing to pay is clarified.
2. Definition of Externalities
Externalities in economics are the costs or benefits that are not considered in the market price of goods or services because they are not included in supply price or the demand price (“Economic Glossary”, n.d.). They are the consequences of industrial or commercial activities which affect other parties (“Oxford Dictionary”, n.d.). In details, externalities are the third party impacts occurring from the production and/or consumption of goods and services for which no reparations are paid. In the case of the external benefit is generated, it is called “positive externality”. In contrast, it is called “negative externality if an external cost is created. The high effects of negative externalities could create inefficient economy or market failure. In economics, for any project there is a social cost which is the summation of the private cost of the project and the externalities. For example; the industrial companies/ factors throw the wastage in the river or beside a residential area which create negative externalities for other firms and consumers in terms of cleaning up and human health (“tutor2u”, n.d.).
3. Airports externalities
The airports are the one of the basic infrastructure of the countries in the world. It provides one of the essential economical transporting systems inside and outside the country. There are many factors affect on how
References: Economic Glossary. (n.d.). Economic Definition of externalities. Retrieved February 7, 2014, from http://glossary.econguru.com/economic-term/externalities Oxford Dictionary. (n.d.). Externality. Retrieved February 7, 2014, from http://www.oxforddictionaries.com/definition/english/externality tutor2u. (n.d.). What are externalities? Retrieved February 8, 2014, from http://tutor2u.net/economics/content/topics/externalities/what_are_externalities.htm Economics Online. (n.d.). Positive consumption externalities. Retrieved February 8, 2014, from http://www.economicsonline.co.uk/Market_failures/Positive_externalities.html Betancor, O., & Rendeiro, R. (1999, September). Regulating privatized infrastructures and airport services. Retrieved February 8, 2014, from http://books.google.com.om/books?id=CJ6jmJbvdwUC&pg=PA44&lpg=PA44&dq=airport+negative+externalities&source=bl&ots=pELGPtbwmQ&sig=rVeGtG1NdR18mtDiVIPSAjdGIiU&hl=en&sa=X&ei=tnz2UtaSDImRrAew0oDYDg&redir_esc=y#v=onepage&q=airport%20negative%20externalities&f=false Wikebedia. (n.d.). Willingness to pay. Retrieved February 9, 2014, from http://en.wikipedia.org/wiki/Willingness_to_pay