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a) Externalities, both positive and negative.
An externality is an effect on the third part who is not directly related to the production or consumption of a good.
An externality is also said to be a consequence of an economic activity experienced by unrelated third parties.
Externalities lead to market failure because the price equilibrium does not accurately reflect the benefits and cost of the product.
b) Overprovision of demerit goods.
Demerit goods are private goods that are over consumed by individuals. Examples are, cigarettes and alcohol. Smoking cigarettes emits smoke which pollutes the environment hence affects people negatively through passive smoking.
c) Environmental concerns; where social costs are greater than private costs.
d) Under provision of merit goods such as education and health facilities.
e) Lack of public goods in this case environmental quality.
Dullayo answered the question on May 6, 2018 at 19:03
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