Lesson Plan

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Lesson Plan
Grade: Date: 17/01/2026
Subject: Economics
Lesson Topic: the welfare loss resulting from consumption and production externalities
Learning Objective/s:
  • Describe private versus social costs and benefits and define externalities.
  • Explain how negative production and consumption externalities generate welfare loss.
  • Calculate dead‑weight loss triangles for negative externalities using supply‑and‑demand diagrams.
  • Evaluate policy instruments (taxes, subsidies) that internalise externalities.
  • Interpret diagrams to identify market versus socially optimal equilibrium.
Materials Needed:
  • Projector and screen for diagram slides
  • Whiteboard and markers
  • Handout with supply‑and‑demand graph template
  • Calculator worksheets for DWL calculations
  • Printed summary of externality types and policy responses
 Introduction:

Start with a quick poll: “What everyday activities create costs or benefits for people not involved?” Link students’ examples to the concept of externalities, then state that by the end of the lesson they will be able to identify welfare loss and propose corrective policies.
Lesson Structure:
  1. Do‑now (5 min): Students write examples of positive and negative externalities on sticky notes and share.
  2. Mini‑lecture (10 min): Present key definitions and show the standard supply‑and‑demand diagram highlighting MPC, MSC, MPB, and MSB.
  3. Guided practice (12 min): Work through the provided numerical example to calculate the dead‑weight loss from a negative production externality; students complete steps in pairs.
  4. Group activity (10 min): Analyse a negative consumption externality (e.g., smoking), sketch the graph, and compute the DWL.
  5. Policy discussion (5 min): Match each externality type to appropriate corrective measures (Pigouvian tax, subsidy, regulation).
  6. Exit ticket (3 min): Write one sentence summarizing how welfare loss is represented graphically.
Conclusion:

Recap that externalities create a gap between private and social marginal curves, producing a triangular welfare loss that can be measured and corrected. Emphasise that taxes or subsidies shift the curves toward the socially optimal outcome. For homework, ask students to find a real‑world example of a positive externality and outline a suitable subsidy policy.