Business Studies – 6.2.3 External costs and benefits | e-Consult
6.2.3 External costs and benefits (1 questions)
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External costs are costs incurred by a third party who is not directly involved in a transaction. In this case, the air and noise pollution are the external costs. These costs can have a range of negative impacts:
- Health problems: Air pollution can lead to respiratory illnesses.
- Reduced property values: Noise and pollution can make the area less desirable.
- Environmental damage: Pollution can harm local ecosystems.
- Reduced quality of life: Residents may experience stress and discomfort.
External benefits are benefits enjoyed by a third party. The creation of more jobs is the primary external benefit. This can lead to:
- Increased income for local residents.
- Reduced unemployment figures.
- Increased local spending and economic activity.
Addressing External Costs: A business can attempt to address these costs through various methods:
- Investment in pollution control technology: This can reduce air and noise emissions.
- Community consultation: Engaging with the local community to understand their concerns and potentially mitigate them.
- Compensation schemes: Providing financial compensation to affected residents.
- Sustainable practices: Implementing environmentally friendly operational procedures.
By addressing these external costs, the business can improve its reputation and potentially gain support from the community.