Naked Economics Case Summary

3. The opportunity cost of the avian flu outbreak in Mexico is the shortage of eggs. Due to the Avian Flu, producers would have to kill more chicken which cause prices to increase. The outbreak of the flu had caused a significant financial crisis in Mexico’s economy. The significant increase in price has caused fewer buyers to purchase eggs. People also lost most of their business because of the crisis.
4. The elastic is the increase of price of the eggs. Since the price of the eggs had increased, there would be a decrease in demand. The inelastic is the decrease of price of the eggs where buyers will buy more eggs because of price reduction which increases demand. The possible change in the egg producer’s revenue given the price increase that took place in the market will result in a reduction of revenues. Increasing the price of the eggs will result in less sales of the eggs which will decrease revenue of the eggs.
Question # 2
1. The above example describes an externality because after the massive oil spill that occurred in the Gulf of Mexico, Florida lost millions of dollars due to the incident. Out of all the states that were hurt by this, Florida had it the worst. The incident was brought upon them and their costs or benefits

Externalities are an economic activity where the effect of production of goods and services can be effected which will cause the costs or benefits to be forcefully accepted. There would not be a legitimate measure of a good’s value, anytime externalities occur. In externalities, there are social and private costs. There are two types of externalities which is positive and negative externality. Negative externality is a decision made by a firm that can increase cost to society more than it can for private cost. It also creates market failure. An example would be pollution. Positive externality is a production of any goods and services which will give benefits towards a third party. An example would be education and less