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Negative externalities: withdrawing groundwater

When one person withdraws groundwater there is less water available for other users and the environment. This creates a negative externality as the social costs of withdrawing groundwater are higher than the private costs. Since users only take into account their private costs, negative externalities mean that the actual amount of water used (QA) is more than the efficient amount (QE) and the resource is overused creating a welfare loss.

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Uploaded on August 9, 2012
Taken on August 9, 2012