<a href=“http://apcentral.collegeboard.com/apc/public/repository/ap09_frq_microeconomics.pdf”>http://apcentral.collegeboard.com/apc/public/repository/ap09_frq_microeconomics.pdf</a></p>
Can anybody explain me number 1.)e.)? Does social benefit go up because there is an increase in demand etc., or is it just simply marginal benefit of society in general goes up?</p>
<p>Social benefit goes up because there is a higher marginal benefit in watching television. As a result, it moves thee demand curve to the right, because people will see that there is a benefit to watching television, thus increasing their consumption.</p>
<p>Wait, so does that shift in demand cause more benefit, or does the marginal benefit for the society in general increases because it’s “better” to watch TV now?</p>
<p>It doesn’t really shift the demand curve. It is describing a positive externality (the social benefit is greater than the private benefit). This can be shown on a graph by creating a second demand curve for the social benefit that falls above the original “private” demand curve. Thus, the new socially optimal point (where P on the social benefit curve equals MC) occurs at a larger quantity. Society underallocates resources for goods with positive externalities.</p>
<p>Yea, just remember that the socially beneficial curve is to the right of the demand curve if there is a positive externaility. It is to the left if there is a negative externalities.</p>
<p>If the social benefit curves confuse you in general then I would recommend just going over externalities really quickly, its not too hard</p>
<p>Good luck on thursday :D</p>
<p>I just got to externalities… Wow, it makes so much more sense now, haha.</p>