HSC Economics Questions. (1 Viewer)

[Mata10]

Anyone know answers to the following questions, really struggling.

Distinguish between private and social costs in relation to environmental sustainability. (2 Marks)

Explain how an increase in financial injections could stimulate economic activity through the multiplier process. (3 marks)

 

[Drifting95]

Distinguish between private and social costs in relation to environmental sustainability. (2 Marks)

Private costs are the costs to produce the good or service such as those accumulated from the purchasing of inputs. On the other hand, social costs are the negative effects upon the wider community caused from the production of the good or service, such as increased pollution of environmental degradation in society.


Explain how an increase in financial injections could stimulate economic activity through the multiplier process. (3 marks)

The multiplier effect is whereby a greater than proportionate increase in national income arises from an initial investment into the economy, such government expenditure. As a result, an increase in financial injections, and thus a rise in aggregate demand can stimulate economy activity due to the income creating effect caused through the amount of this initial injection which is consumed, also known as the marginal propensity to consume (MPC). Accordingly, this amount consumed creates rises in business profits through the consumption of goods and services, therefore flowing through to increasing wages of employees and therefore rises in consumption as they consume a proportion of this wage increase. Consequently, this leads to a rise in overall aggregate demand (C+I+GE+(X-M), therefore stimulating economic activity and promoting business investment and other forms of financial injections due to improved business and consumer confidence.

 

[NWO]

lol thanks drifting. I need help with those as well.

 

[NWO]

lmee clarify it

private cost: includes only costs of production but does not include negative externatilities such as damage to the environment
social costs: includes BOTH costs of production AND costs of damage to the environment

Am i right? XD

 

[Drifting95]

lol thanks drifting. I need help with those as well.

i struggled with the multiplier, i find it difficult to explain the concept logically

lmee clarify it

private cost: includes only costs of production but does not include negative externatilities such as damage to the environment
social costs: includes BOTH costs of production AND costs of damage to the environment

Am i right? XD

From my understanding

Private Costs: Cost of production to producers and purchasing cost to consumers. Correct, it DOESN'T include negative externalities.

Social Costs: They are the costs to the wider community through production, such as pollution. It DOESN'T include the costs of production, as this is the private cost.