RESPONSE ESSAY SUMMARY SHEET Example | Topics and Well Written Essays - 250 words - 1

RESPONSE SUMMARY SHEET - Essay Example paper analyzes some common negative externalities, as well as possible ways through which government intervention may control and regulate these externalities. The study conducted in this paper is based upon a case study of the wastewater management system in Australia. The analysis of negative externalities in this case study is better approached by tackling the following three questions: 1. Explain what negative externalities are, and why there may be the case for government intervention to address them. Describe some of the ways to correct the negative externalities and the pros and cons of each method. Provide real life examples. An externality occurs when some activities by consumers or producers result in unintended direct or indirect effects over other unintended players in the market. Externalities may be negative or positive (Laffont 2008). In this case, negative externalities arise when the action of a party results in damage to other people without any form of compensation being awarded for that damage. Within the context of a business environment, a negative externality refers to a spill-over of an economic transaction that result in negative effects on a party that has no any direct involvement in the activity that causes the externality. Thus, the first party does not incur any costs for the repercussions on society while the second party gets no benefits from the effects inflicted upon them. Externalities constitute one of the many reasons that lead to government intervention within the economic sphere. Thus, it is because the production, consumption, as well as investment decisions made by households, individuals, and organizations or firms usually affect people who are not directly involved in the transactionsMost externalities fall into the technical externalities category. In this context, the indirect effects impact on the production and consumption opportunities of other people, though the cost of the product or service does not consider