positive/negative externalities

We looked at positive and negative externalities and what can be done to reduce the negative externalities or expand the positive externalities. How can we relate what happened with Coronavirus back to these ideas? Are there any positive/negative externalities here and if so, what are they and what is being done about them?

Requirements: 200+ words

Answer preview

In the case of the Corona Virus pandemic, negative externalities occur when for instance, an individual with COVID boards the same car with other people that do not. This causes negative externalities as it spreads the virus to other individuals. Behaviors that increase other people’s risks of COVID -19 infection are considered to be negative externalities. Positive externalities may also occur when the risk of contracting COVID-19 is high, and this is because people will be forced to self-isolate. In addition, following the government restriction on Covid-19 will reduce the spread of the virus, ensuring benefits to the third party (Okyere, Forson, and Essel‐Gaisey, 2020). The pandemic has also prompted the trying out of new technologies to help curb the virus. During the lockdown, people were forced to stay indoors; hence online platforms had an increased opportunity to provide services to the people. This is a positive externality for online businesses. The lack of social distancing creates a negative externality, increasing the risk of infections in society. In order to prevent the negative externalities, the government put in measures that will reduce the risk of infection. In addition, the government provided tax breaks and subsidies for businesses that were forced to shut down and make losses during the pandemic.

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