Alex Tabarrok (reference below) defines social cost is the cost to everyone – the sum of private cost and external cost.
- Private cost – the cost paid by the consumer or the producer (see Private Cost)
- External cost – a cost paid by bystanders, by people other than the consumer or producer (see External Cost)
- Social cost – the cost to everyone: the private cost + external cost
Atlas topic, subject, and course
Alex Tabarrok, minute 4:42 of An Introduction to Externalities (12-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/externalities-definition-pigovian-tax, accessed 6 May 2016.
Page created by: Ian Clark, last modified 6 May 2016.