Editing Externality (section)

===External benefits===
[[File:Positive externality.svg|384px|right|thumb|Supply curve with external benefits; when the market does not account for the additional social benefits of a good both the price for the good and the quantity produced are lower than the market could bear.]]
The graph shows the effects of a positive or beneficial externality. For example, the industry supplying smallpox vaccinations is assumed to be selling in a competitive market.  The marginal private benefit of getting the vaccination is less than the marginal social or public benefit by the amount of the external benefit (for example, society as a whole is increasingly protected from smallpox by each vaccination, including those who refuse to participate). This marginal external benefit of getting a smallpox shot is represented by the vertical distance between the two demand curves. Assume there are no external costs, so that social cost ''equals'' individual cost.

If consumers only take into account their own private benefits from getting vaccinations, the market will end up at price '''P<sub>p</sub>''' and quantity '''Q<sub>p</sub>''' as before, instead of the more efficient price '''P<sub>s</sub>''' and quantity '''Q<sub>s</sub>'''. This latter again reflect the idea that the marginal social benefit should equal the marginal social cost, i.e., that production should be increased as long as the marginal social benefit exceeds the marginal social cost. The result in an [[free market|unfettered market]] is ''[[inefficiency|inefficient]]'' since at the quantity '''Q<sub>p</sub>''', the social benefit is greater than the societal cost, so society as a whole would be better off if more goods had been produced. The problem is that people are buying ''too few'' vaccinations.

The issue of external benefits is related to that of [[public goods]], which are goods where it is difficult if not impossible to exclude people from benefits. The production of a public good has beneficial externalities for all, or almost all, of the public. As with external costs, there is a problem here of societal communication and coordination to balance benefits and costs. This also implies that vaccination is not something solved by competitive markets. The government may have to step in with a collective solution, such as subsidizing or legally requiring vaccine use. If the government does this, the good is called a [[merit good]]. Examples include policies to accelerate the introduction of [[electric vehicles]]<ref name="BuekersEV">{{cite journal |last1=Buekers |first1=Jurgen |last2=Van Holderbeke |first2=Mirja |last3=Bierkens |first3=Johan |last4=Int Panis |first4=Luc |title=Health and environmental benefits related to electric vehicle introduction in EU countries |journal=Transportation Research Part D: Transport and Environment |date=December 2014 |volume=33 |pages=26–38 |doi=10.1016/j.trd.2014.09.002 |bibcode=2014TRPD...33...26B |s2cid=110866624 }}</ref> or promote [[cycling]],<ref name="Buekers2015">{{cite journal |last1=Buekers |first1=Jurgen |last2=Dons |first2=Evi |last3=Elen |first3=Bart |last4=Int Panis |first4=Luc |title=Health impact model for modal shift from car use to cycling or walking in Flanders: application to two bicycle highways |journal=Journal of Transport & Health |date=December 2015 |volume=2 |issue=4 |pages=549–562 |doi=10.1016/j.jth.2015.08.003 |bibcode=2015JTHea...2..549B }}</ref> both of which benefit [[public health]].